Preamble

Morning Sitting

Mr. SPEAKER resumed the Chair at Ten o'clock a.m.

HOUSE OF COMMONS (REDISTRIBUTION OF SEATS) (No. 2) BILL

Order for Third Reading read.

10.0 a.m.

Mr. Callaghan: I beg to move, That the Bill be now read the Third time.
Normally when we discuss these questions there are four matters on which the House concentrates, though not in any particular order. One is the frequency of redistributions; in other words, how often boundaries are to be changed. Second, that so far as possible there should be equality of votes. Third, that there should be a great reluctance not to implement recommendations of the Boundary Commission. Fourth, that local government boundaries and Parliamentary boundaries should so far as possible coincide. If one looks through the whole pattern of debates—not on this Bill, but at almost any other time when we have had a redistribution—that pattern can be seen.
It is fair to say this morning that the Opposition have concentrated on two of those principles and the Government have concentrated on the other two. The two upon which the Opposition have concentrated are, first, that we should in all circumstances, at all times and at all costs implement the Boundary Commission's Report; and, second, that we should ensure so far as possible equality of votes. They have failed signally on the second point because they have not been able to demonstrate that, even after this redistribution, there will be anything like equality of votes. However, I say that in passing.
The Government have concentrated on the need to avoid frequent redistributions and on the case for ensuring that local government and Parliamentary boundaries coincide. It is only in the series of debates of the last week that the Opposition have resiled at all from their position on those two principles. Up to this week

they have always been as convinced as those of us on this side of the House of the need for local government and Parliamentary boundaries to coincide. They have expounded it in speeches, which I could quote; they have ensured that redistributions took place on these lines. But this week we have heard them moving away from it, for the very obvious reason that it does not suit their argument on this particular occasion.
In the past they have been at one with this side of the House on the consequences of too frequent redistribution. But this week they have also moved away from that.

Several Hon. Members: rose—

Mr. Callaghan: I will not give way now.
They have said that, in effect, they do not mind if the electoral map is torn up frequently, indeed twice in the next five or six years, although their own constituencies do not want it, as the hon. Member for Ormskirk (Sir D. Glover) was good enough to say last night. He said that his constituency was delighted that we were not going ahead with this redistribution at this time.

Sir D. Walker-Smith: rose—

Mr. Callaghan: I will allow an intervention by way of preface. I have already had proposed attempts at intervention.

Sir D. Walker-Smith: I am obliged to the Home Secretary for his characteristic courtesy. I am only asking him to assist the House. He speaks of these matters in absolute terms. Surely it is clear from the Schedules to the existing Act that this is a qualified principle so far as practicable taking into account certain other principles, including the avoidance of excessive disparity in the electoral pattern.

Mr. Callaghan: I would not deny that. All the principles I have quoted are qualified—certainly the one about equality of votes is qualified. When one looks at the results of the Boundary Commission's Report, that is equally qualified. As the right hon. and learned Member for St. Marylebone (Mr. Hogg) pointed out last night, he represents a constituency of only 46,000 whereas other hon. Members represent constituencies of over


80,000, almost twice the value. All the principles are not absolute, and I agree that one must not particularise. It is not just the local government boundary principle which is not absolute; none of the principles is absolute in that sense. We must get as close to them as we can.
The consequence is that the Opposition by their refusal to face the practical consequences of redistribution, by moving away from the principle to which hitherto they have adhered that redistribution should not take place frequently, by their failure to argue the principle that they have argued hitherto that local government boundaries and Parliamentary boundaries should coincide, have failed to meet the Government's case. They have stuck blindly to their central point that in all circumstances the Boundary Commission's Report should be implemented.

Mr. Nicholas Ridley: rose—

Mr. Callaghan: I shall not give way too often. This is supposed to be a short debate.

Mr. Ridley: Would the Home Secretary not agree that another principle has been enunciated in this debate? It is that these matters are best left to impartial persons to fix and that they should not be decided upon by politicians?

Mr. Callaghan: I thought that was implicit in the fourth principle I have outlined, that the House should be very reluctant not to implement the Reports of Boundary Commissions. I agree entirely. That is why where that principle can be allied, as it now is, with the fixing of local government boundaries, the Government are proposing to the House that we should implement the Report of the Boundary Commissioners.
In the case of Greater London the boundaries are fixed. So far as I know, there will be no further tampering with them for some years, certainly not on a major scale. So here the two principles coincide: first, that the House should be slow to interfere with the Boundary Commission's Report; and, second, that the local government boundaries should coincide with Parliamentary boundaries.
This is a proper case in which we are implementing the Report of the Boundary Commission. As for the rest, I shall

comment on the fact that the equality of votes and the need for it is a very partial principle and is not one that I have noticed being argued very fully by the Opposition on earlier occasions. Indeed, I can remember occasions when it has been argued against most strongly.
I remember the City of London battle when there were two Members representing 4,000 constituents in the House. Some of my hon. Friends will remember how the Sheriffs of the City of London arrived in full regalia at the Bar of the House—very monumental and extremely decorative they looked as they stood there —and presented their Petition and sought to persuade the House that two Members were needed to represent 4,000 constituents in the City. I do not remember very much opposition on that occasion with arguments in favour of equality of votes, nor do I remember the Opposition arguing strongly in favour of equality of votes in the long debates on the abolition of the Business votes. There was no cry then about "One man, one vote, one value".

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): There were also the university votes.

Mr. Callaghan: The university votes, as the Leader of the House says, were yet another story. The plain truth is that the Opposition, and to some extent the Government, take up and embrace these principles or such as them as they think are appropriate to the particular case they are arguing.
It was not until late last night or early this morning that the mask slipped. We then saw why the Opposition were really insisting on the principle of early implementation of the Boundary Commission's Report, when the right hon. and learned Gentleman the Member for St. Marylebone said they were being cheated out of a number of seats. So all the cant—

Mr. Hogg: rose—

Mr. Callaghan: I will give way in a moment. All the cant about principles is bound up with the fact that somebody has convinced the right hon. and learned Gentleman—and I do not know whether his arithmetic is right—that if the Boundary Commission proposals were implemented they would gain a number of seats. That is what it conies to.

Mr. Hogg: If the Home Secretary would care to quote me accurately or to refer to HANSARD when it is published, he will find that what I said was that, although I was convinced we were being cheated, that was not our case.

Mr. Callaghan: On the other hand, the right hon. and learned Gentleman put it the other way round, as he often does. He started off with his high-flown sentiment, saying, "I would not dream of arguing this case on the basis of whether we shall gain or lose a number of seats." He went on, "But our deep resentment arises from the fact that we are being cheated out of a number of seats." That was the order in which he put it. I have a vivid recollection of it, and I thought at the time that it was very impressive.
The Opposition do not prove their case by illustrating that in Manchester the Labour Party will lose one seat because a seat is being abolished, or that a similar situation will arise in Liverpool. My hon. Friend the Member for Rushcliffe (Mr. Gardner) told us that in Nottingham we shall gain two or three seats. No balance sheet has been produced and nor will there he, because it is not possible. I have argued before that in a situation like that of the 1964 Election where 25 seats were won by less than 500 votes and where any slight tilting of the balance, any shower of rain, any television programme might have altered that result, it is impossible to say. Indeed, it is not only impossible to forecast the result; it is impudent to do so.
I do not accept the story which has been swallowed by right hon. and hon. Gentlemen opposite that we necessarily gain a number of seats as a result of this redistribution. I admit that they have convinced the Press of this. However, most of the Press has hardly stated the case. It has swallowed the propaganda holus bolus, without any attempt at analysis. I have seen only one analysis in any of our journals, and I received a letter two days afterwards telling me that it was wrong. The plain truth is that the Press has never attempted to put the case that if we were to push through the proposals of the Boundary Commission as a whole we shall be indulging in two large-scale redrawings of the electoral map within a short period of time—a period of such a length that,

on the last occasion when it happened, Parliament said, "Enough. We will not have any more of this." That was the reason for the 1958 Act. This case has not been put at all, but it should be put and it will be put.
The Bill itself will operate in the circumstances that, as soon as the Redcliffe-Maud proposals begin to take shape and it can be seen what the boundaries are likely to be, the Boundary Commission will be empowered and enabled then to begin its work knowing that it will have only one set of boundaries with which to contend. I do not deny that any Bill on these matters including the implementation of the Boundary Commission's Report will have its disadvantages. There is no perfect course. We have to weigh the balance of advantages and disadvantages in a number of different directions.
Right hon. and hon. Gentlemen opposite have thrown language across the Floor which, although it has not hurt very much, I have resented since they have refused to face the fact that there are other arguments. They have failed to answer them. They have insisted on the implementation of the Boundary Commission's recommendations, and, as a result of what the right hon. and learned Gentleman said last night, we know why they think that.
The Opposition allege that we have not had enough time to discuss this Measure. I think that we have, despite the Guillotine. It was clear last night that the constituency cases being put forward, although very important, could not be decided and boundaries altered by means of exchanges across the Floor. It must he left to the Boundary Commission, and the Commission will be fixing the boundaries. If right hon. and hon. Gentlemen opposite do not accept that, they cannot understand the Bill.
The boundaries will be fixed by the Commission for the constituencies concerned. What Parliament has been concerned with is the timing of the introduction of the changes. It is that fact and the fact that the Conservatives believe that there is bound to be an election that have engendered the whole of their synthetic indignation. I can understand that, but it does not make for an atmosphere in which these matters can be discussed sensibly. Hence the


Guillotine. However, it became clear by two o'clock this morning that all the arguments which could be adduced had been adduced. Given the acceptance by the House of the principle that the Boundary Commission's proposals as a whole would not be implemented for the reasons given, it is clear that there has been sufficient time for debate.
For all those reasons, I commend the Bill to the House and to the country. As the argument goes on, if it goes on, I have no doubt that the case will become clear and that it will be seen by the country that what this is is a sheer naked attempt by the Conservative Party to grab seats. If that argument goes on in the country, there will be no doubt about the result.

10.16 a.m.

Mr. Hogg: It is a tradition of this House that a Third Reading debate deals with the provisions of the Bill. The Home Secretary departed fairly widely from that tradition, but he need not think that he can get away with this Bill either by misrepresenting the facts or the provisions of the Bill or by misrepresenting the Opposition's case, which, owing to the incompetent way in which the Government have managed their business, is now becoming increasingly well known.
Let me deal first with the last claim, that the Bill has been adequately discussed. I give only one example to the contrary which I gave at half-past two this morning, namely, that none of the botched-up provisions relating to the periphery of London has been discussed —or, rather, has been discussed in order, because a number of disorderly speeches were made from the benches opposite when we debated an earlier series of Amendments.
Second, I want to put in its correct perspective the argument which the Home Secretary presented, I would like to think innocently, about the probable effect of what is now being done. I have always said—I said it at the beginning on the Motion, I said it on Second Reading, and I said it several times in Committee —that I do not know what the effect of the Bill will be electorally. What I do know and what is relevant is what all competent critics think will be the result electorally. As The Times was careful to point out, it made inquiries of the two Central Offices in order to discover what

they think will be the result electorally. The answer appears to be somewhere between six and 20 bonus seats to the Labour Party.
What matters is not what will happen but what people think will happen and, in particular, what the right hon. Gentleman thinks will be the result of his action. He knows, because he has been told more than once and because it is manifestly true, that if and in so far as the result of the non-implementation of the Boundary Commission's Report is to give this bonus to the Labour Party, it was at least incumbent upon the Labour Party if it was really acting honestly to act in accordance with constitutional precedent and to come here as soon as it knew what it planned to do.
The whole burden of our case on this part of the argument has been that, instead of doing it three years ago, as one hon. Gentleman opposite pointed out they could have done, when the terms of reference of the Redcliffe-Maud Committee were known, they deliberately allowed the Boundary Commissions, and each of them, to waste their time, to waste public money, and to deceive local authorities innocently into thinking that they were doing something worth while. Only when the result of the discussion was know, only when the report was delivered, and only when the results had been assessed by the two central party organisations did the Government think it proper to come to the House of Commons and say, "All this has been a waste of time. We must not do it at all. All this work must be thrown away."

Mr. Callaghan: rose—

Mr. Hogg: I will give way to the right hon. Gentleman in a moment. I want to put this argument still further in its perspective. We have never used this as an argument against the merits of the Bill. Having, as we believe, destroyed the merits of the Bill, we then point to this set of facts—what people believe will be the electoral consequence —as an argument demonstrating the bad faith of the Government.

Mr. Callaghan: I am sorry that I did not deal with this point—perhaps I should have done—but there were interchanges. I want to make this comment, which the Opposition Chief Whip knows to be true, that if the Government had followed the course that the right hon. and learned


Gentleman is suggesting and had come three years ago, the Opposition would have taken exactly the same line then as they are taking today; namely, that the Boundary Commissions should go on and that their recommendations should have been implemented. That will not be denied.

Mr. Hogg: The right hon. Gentleman is really not doing himself justice. The merits of the argument probably would have been identical then with what they are now. But the Government, at any rate, would have been able to establish some vestige of respectability. They might have led someone to believe that they were acting in good faith. I am using this argument not to demolish the merits of the case, but, having demolished the merits of the case, to attack the Government's good faith.
The right hon. Gentleman has raised the subject again and sought to persist in his argument. He complains of what he describes as schizophrenia on my part because I have been treating him and his right hon. and hon. Friends in our deliberations on this Bill rather differently from what I have done in the past. The answer is that, like most of us, when I think I am dealing with honest men I behave in one way, and when I think I am dealing with people who are behaving dishonestly I deal with them in another. If that is schizophrenia, I can promise the right hon. Gentleman a great more of it.
The basic case against the Bill is not its bad faith but the outrage which it inflicts upon our constitutional law. The situation which we now have in Clause 1 is that after 15 years we admittedly have, at the end of the tether provided by the 1958 Act, a number of grossly distorted constituencies, distorted in numbers, which in this context probably means more than any other factor, but equally grossly distorted in terms of local government boundaries, which have also altered during the course of 15 years. After four years of effort, which is now to be wasted, the Boundary Commissions have brought forward a series of proposals which will put an end to the distortions so far as the electoral rules demand that they should.
We have never denied that the rules demand that account should be taken, so far as practicable, of local government

boundaries—Rule 4—and that account should be taken of the electoral quota, numbers—Rules 5 and 6. Rule 6 states:
 A Boundary Commission may depart from the strict application of the last two foregoing rules if special geographical considerations, including particularly the size, shape and accessibility of a constituency, appear to them to render a departure desirable.
So the reports of the Boundary Commissions, which have been laid before the House somewhat tardily, have taken into account every one of the factors which Parliament in its sovereignty has demanded should be taken account of, and it is the Government who are departing from those rules—their own rules —which they do not seek to impugn now and which the Boundary Commissions have taken into account.
Clause 1 provides that the distorted constituencies which the Boundary Commissions have proposed to rectify in accordance with the rules, whose distortion is not static but progressive, are to be continued indefinitely—and I shall come to the meaning that I attach to that phrase—simply because the Government claim an excuse which I will also proceed to discuss.
I say "indefinitely" because Clause 1(1) provides for fixed periods of a minimum of 10 or a maximum of 15 years from now, and these periods can be abridged only if the Home Secretary, in his unfettered discretion, chooses to put before Parliament draft Orders in Council abridging them. This is the recommendation that the right hon. Gentleman is making to the House when he proposes the Third Reading of the Bill.
When we are asked to consider the sovereignty of Parliament or of the House of Commons, as the hon. Member for Ebbw Vale (Mr. Michael Foot) asks us to do, we cannot but note that that is not what the provisions of the Bill provide. Under Clause 1(3) Parliament has no power to abridge the Home Secretary's discretion. The initiative throughout is to be taken by the Home Secretary on a purely subjective assessment, as to which he has refused even to agree that the Boundary Commissions shall be in a position to advise him. That is the provision of the Bill which we describe as a constitutional outrage. When we note that the effect of it, according to the experts, is to add eight to 20 seats to the Labour Party, can there be any


surprise that a Bill introduced with those provisions and at this point of time should be treated as a deliberate attempt to gerrymander the constituencies?
That is the point that we have reached. Nothing that has happened since the Bill was introduced has caused us in any way to modify our opinion about that. Nor, incidentally, has it caused the Press to modify its opinion about it. The only people who seem to be united in support of the Bill are the members of the Labour Party. It has caused me infinite pain to see hon. Members, with whom I have disagreed over many a long year as extremists upon the other side, but whom, none the less, I had respected up to this moment as experienced and effective and, I believed, sincere parliamentarians, coming forward with trumped up arguments which had neither relevance nor cogency to support the disreputable provisions which I have been trying to describe. Apparently the situation has now become such that the Labour Party can be united only when it is determined upon something discreditable.
Let me give one or two examples of what I mean. The right hon. Gentleman used some of them in his speech a few moments ago. He said, for instance, that we were saying that in all conceivable circumstances the Boundary Commission should be implemented. That is nothing like anything that I have said. I have only said that in these circumstances the Boundary Commission's Report should be implemented, and that is the view which I have sought to put forward. The right hon. Gentleman has attributed to us the view that every vote should always have numerically the same value, but that is not true. All we have asked is that the rules contained in the Schedule to the Act, which the Bill does not repeal or modify in any way, should be applied, and applied impartially after four years of serious work by the Boundary Commission.
Several hon. Gentleman opposite thought that they were scoring a point when they claimed that in 1951 the party of which I am a member succeeded in obtaining a majority in this House despite a minority of the totality of votes in the constituencies. The mathematical fallacy behind that was exposed last night by my hon. Friend the Member for Moray and Nairn (Mr. Gordon

Campbell), who has asked me to explain that the is unable to be present this morning as he is engaged in the Scottish Grand Committee.
But there is a constitutional fallacy in it, too. When we won in 1951 we won in accordance with the electoral law for the time being. If the Labour Party gains at the next election, whenever it may be, it will gain as a result of the law which the Government have deliberately rigged. Our complaint about the Bill is that the right hon. Gentleman, by utilising their majority, and even stifling discussion, has insisted that the next election shall be fought with loaded dice, and has provided that if by any chance he wins by a narrow majority, which I do not for a moment expect, he will insist on the dice going on being loaded until he tells us in his absolute discretion that we may start playing fair at last.

Mr. Molloy: The right hon. and learned Gentleman referred to the argument last night about the Labour Party winning the majority of votes but not winning the election, and claimed that the argument had been destroyed. What really happened was that for many years the Conservative Party had a built-in start of nine seats in Ulster, and this has been exacerbated over the years. Because of this, we have the ludicrous position of the Labour Party having to get nearly half a million votes before it can even be equal with the Tory Party.

Mr. Hogg: The hon. Gentleman excels himself in not seeing the point. The point that I was seeking to drum into his head was the simple one that no one has impugned the Parliamentary constituencies in Ulster, precisely because they are under the dominance of this House, under a Boundary Commission of which Mr. Speaker himself is the Chairman. The precise point which I was seeking to put into the hon. Gentleman's mind was that the law of the land, passed by the Labour Government in 1949, gave us whatever majority we got in 1951. What the right hon. Gentleman is seeking to do is to pervert the law of the land by this Bill and to play the game with loaded dice—dice which he has loaded.
When the right hon. Gentleman then goes on to put forward the Redcliffe-Maud proposals as some flimsy excuse for what he is proposing to do, I make


once more the following simple observation. We do not know whether the Government will implement any of the Redcliffe-Maud proposals. The only positive assurance that we have is that they will somehow abolish the distinction between town and country, which they called the main principle of the Redcliffe-Maud Report.
We do not know when the Government will do that. We do not know what the boundaries will be. What we do know is that the right hon. Gentleman gave us a number of extremely vague assurances yesterday afternoon, of which the newspapers this morning say that they will cause deep alarm in every local authority in the country. But the local authorities can be reassured, because they have no more reason to believe the right hon. Gentleman than we have, and it was only put in to lend verisimilitude to an otherwise implausible explanation.
The Redcliffe-Maud Report, in what ever form the proposals are ultimately implemented, by whatever Government, of whatever political complexion, cannot justify, in terms of any facts or any arguments which have been presented to us, the continuance indefinitely of a distorted electoral map which has already become archaic after 15 years, and which the Commission's impartial report, which the House was perfectly free to accept or reject if the terms of the law had been complied with, which they have not, has sought rather belatedly to catch up with and to rectify, and to rectify in accordance with rules laid down by Parliament when the Labour Party was in a majority.
We are being asked to perpetuate a distorted electoral map which continues constituencies in which the number of voters will shortly exceed 120,000, without any recourse to the Boundary Commission under the principal Act, and constituencies whose electorates are below 20,000, without recourse to the Boundary Commission under the principal Act. We are being asked to do that on the ground of proposals which relate only to England, and not to Wales, Scotland, or Northern Ireland, and when we have repeatedly shown, in individual instances, that the existing Boundary Commission's Report, even in the light of the Redcliffe-Maud Report, if we choose to take that as a criterion, will be far more realistic

than the status quo which the right hon. Gentleman, using the pretext of the report, wishes to continue indefinitely.
The result of it all will be, so we are told by those who are better qualified to state the matter than ourselves, to give an electoral bonus to the Labour Party, including the Prime Minister's own constituency. The right hon. Gentleman then has the effrontery to come to Parliament and to state publicly that it is the Conservative Party which is interested only in votes and seats. This is a constitutional outrage. The right hon. Gentleman complains that I have treated him roughly. I can only say that I have not treated him or the Government as roughly as they deserve.

10.39 a.m.

Mr. Lipton: The right hon. and learned Member for St. Marylebone (Mr. Hogg) seems to be making excuses to explain the failure of the Conservative Party to win the next election. That is why he is on the point of explosive indignation all the time. What he does not seem to understand, what he seems incapable of understanding, is that to the extent that the Government are implementing the recommendations of the Boundary Commission the Labour Party will lose a certain number of seats in the London area. Why he should be annoyed about that, I do not know. When he goes on to forecast that if the rest of the Boundary Commission's recommendations applied to the rest of the country it would inevitably mean a gain of seats to the Conservative Party, he is making an unfounded assumption, in support of which he has been able to deduce no substantive proof.
Through the gross misuse, by the Opposition, of the time allotted to the Committee stage, various useful Amendments could not be discussed. It was because of this prodigal waste of time, the constant repetition to the point of tedium, that one of the best Amendments, which the Chair had accepted and which I put down, could not be reached.
I have one substantial criticism of the Boundary Commission's Report, as embodied in the Bill. In paragraph 61, we read that the Commission considered:
…that, in general, existing names—some of them traditional—should be preserved as far as possible…


In the next paragraph, the Commission said:
the assistant Commissioners who held local inquiries in the London boroughs gave particular attention to names.
In paragraph 63, we read:
We considered that it would have been wrong for us to propose names for which there was no local support, specially where there was a strong local desire to retain a well-established name.
The recommendations of the Commission over Lambeth are that all the constituencies should be allowed to retain their accepted names except the Brixton division, which, through some strange quirk of the Commission, is to be known henceforward as Lambeth, Central.
I do not wish to be regarded as representing a railway station. There is ample and adequate historical evidence for the name of Brixton, which was first recorded in 1062 and is mentioned in the Domesday Book. Nevertheless, despite those extracts from the report, the Commission has decided—up to now, the Government have agreed—that Brixton should be known as Lambeth, Central. The Norwood and Vauxhall divisions are to retain their names, as is Streatham. The only one of the four Parliamentary constituencies in the borough whose name will be scrapped is the one with the oldest name historically, which strikes me as very odd.
The provisional recommendation of the Commission was that the division I represent should be known as Brixton and Clapham borough constituency. That was not very satisfactory, but it would have been better than Lambeth, Central, which the Assistant Commissioner found preferable.
On page 22 the Commission refers to the fact that representations or objections had been made to the proposal that Brixton should be known as Lambeth, Central:
 Since both these matters have been covered by the local inquiry and there was no other evidence or dissatisfaction we adhered to our recommendations.
What did the Assistant Commissioner want me to do? If I had known in time, I could have organised a petition with a few thousand names and also a demonstration outside Lambeth Town Hall while the Assistant Commissioner was sitting. But this was the final tribunal. This is

not the way in which decisions should be taken. The suggestion seems to be that there should be turmoil in the streets and that only then could a historical name be preserved. That is not a rational argument.
I make this final appeal to my right honourable Friend. The other place may be able to come to the rescue—[HON. MEMBERS: "Hear, hear."]—but only in this respect, only by way of respecting the historical traditions associated with the name of Brixton. I hope that in the circumstances this one small departure from the holy writ of the Boundary Commission will be accepted by the Home Secretary. It will not bring the whole edifice crashing down in ruins if he makes this concession. I hope that he will find it possible to do so.

10.47 a.m.

Mr. Boyd-Carpenter: The hon. Member for Brixton (Mr. Lipton) flatters himself if he thinks that, had more time been allowed under the Guillotine and his Amendment called, it would have been agreed to. He is not allowing for the fact that the one objective of the Home Secretary throughout was to have no Amendments in Committee and therefore no Report stage. Therefore, the hon. Member lost nothing but the opportunity to air a grievance.
The true purpose of the Bill has not emerged from the Home Secretary's speech today, any more than it emerged from his speech on Second Reading. If the House were really to be asked to accept that this Measure was put forward for good, sound, administrative, reasons because of coming changes under the Redcliffe-Maud Report, there is one step which would have had to be taken to give even the smallest air of verisimilitude to that consideration. That is that it is the long-established convention in these matters that legislation affecting elections is not introduced by the Government of the day without adequate time for consultation with the other parties.
On Second Reading I asked the right hon. Gentleman whether there had been such consultations and he gave no reply. When I challenged him again, he appeared to accept that he had not attempted to consult.

Mr. Merlyn Rees: The right hon. and learned Member for St. Marylebone (Mr. Hogg) has said that no consultations took place. He has said so.

Mr. Boyd-Carpenter: I am obliged. That is also what I am saying. What I do not understand is the point of the Under-Secretary's intervention.

Mr. Rees: I will willingly come back to this point later. For now, is the right hon. Gentleman saying that he agrees that no approach was made to the Opposition? Let us get this clear. Statements have been made and are being made now. As a leading member of the Opposition, is he saying that no approach has been made to the Opposition?

Mr. Boyd-Carpenter: I asked the Home Secretary, who would have been responsible for such an approach, if one had been made, and he gave no answer. When I said that the absence of an answer on his behalf could be taken only to mean that no approach had been made, the right hon. Gentleman did not challenge me. It is not for me—I do not now sit on the Front Bench—to say whether or not any contacts have been made. It is for the right hon. Gentleman to do that, particularly since his own position is very much involved in all this. If the right hon. Gentleman is prepared to explain that position now, we shall be much obliged.

Mr. Callaghan: I do not wish to go further than repeat what I have said before, that if the Government had brought forward proposals to suspend the work of the Boundary Commission in 1966 we should have had the same opposition then as we are having today. That is all I wish to say.

Mr. Boyd-Carpenter: That amounts to saying, in a garbled way, that no approach was made. Is the right hon. Gentleman seeking to justify no approach having been made on the ground that it would have been of no use?

Mr. Callaghan: The right hon. Gentleman is not entitled to draw any deductions from or to put any more weight on the words I used other than to accept what I said.

Mr. Boyd-Carpenter: What the right hon. Gentleman said has, for him, been unusually lucid and clear. He has

sought to justify the making of no approach. If he had made an approach he would not now be needing to justify the failure to make one. Unless the right hon. Gentleman goes a great deal further, the House is entitled to draw this conclusion.

Mr. Callaghan: These are matters which go through the usual channels. [HON. MEMBERS: "Answer."] I did not wish to be drawn into discussing this matter. An approach was made to the Opposition in 1966. [HON. MEMBERS: "When? "] One was made on 8th August, 1966, and there is a record of the conversation. An approach was made asking whether, in view of the setting-up of the Redcliffe-Maud Commission, the Opposition would agree that the Boundary Commission's proposals should be suspended. The answer to that was "No." The Opposition did not wish to do so. I have attempted not to say this, but if, in spite of my carefully guarded words—the right hon. Gentleman is a lawyer and understands what I am saying—he persists in saying that an approach was not made, I must make the position clear. One was made.

Mr. Boyd-Carpenter: It has taken several sittings to extract the fact from the right hon. Gentleman that an approach was made—in 1966. Is he saying that when the decision was made to introduce this Measure this year an approach was made? The right hon. Gentleman is silent. Is he aware that this was the relevant moment for the Government to make such an approach —at the time when they were deciding to alter electoral matters?
The right hon. Gentleman knows this as well as I do. He knows equally well, whatever he may have done in 1966, that he had a duty to do so in 1969. He may say, "It would not have made any difference". But it would have made this difference; it would at least have given him an opportunity to suggest that he was behaving honourably and constitutionally.
The fact that the right hon. Gentleman did not do that and the fact, on his own showing, that he did not, before introducing this Measure in 1969, make any contact whatever with the Opposition, shows very clearly indeed that his pretext of this being to deal with the necessities of Redcliffe-Maud Report is a sham. He cannot


get away from that by abusing the Press, as he has done, because what I have said is the only possible conclusion that can be reached on the facts.
If the right hon. Gentleman had been acting in a constitutional way—in a way consistent with his pretext of the Redcliffe-Maud Report being the relevant consideration—would he have proceeded by way of the Guillotine? He knows that in most other countries constitutional legislation is not subject even to the ordinary uninterrupted processes of legislation. They are subject to a process which deliberately imposes a measure of delay, with certain constitutional procedures having to be gone through.
In this country we have always taken rather a risk by not having such a provision. It is the risk that we may get a Home Secretary who in a case like this will not allow even the ordinary processes of legislation to function and who, at the end of the first day in Committee—where we were faced with a Bill which he attempted to spring on us, information about which, from the point of view of the intentions of the Government, we were able to extract only after one of my right hon. Friends tabled a Motion a few weeks ago—brought in the Guillotine, which has prevented our discussing even Amendments relating to London on Clause 1. This even ruled out the possibility of his own hon. Friend's Amendments being discussed. This has been done to secure that there will be no Report stage.
Having done that, the right hon. Gentleman is rushing through the Third Reading at this hour of the morning in a limited morning sitting. None of these things is consistent with a Government who are trying simply to make an ordinary sensible administrative change because of the Redcliffe-Maud Report. Then the right hon. Gentleman has the brass face to say. "This is a sheer naked attempt to grab seats by the Conservative Party". Who is talking? Who is legislating? Who introduced the Bill?
My hon. Friends have accepted the full Boundary Commission recommendations for London; and, as a matter of party interest, it is well known that those changes go against us. It therefore does not lie in the right hon. Gentleman's mouth to make such allegations when introducing a Bill which applies the

Boundary Commission's recommendations to London, which benefit his party, and excludes its recommendations in respect of the rest of the country when he knows that this is an exclusion benefiting his party. For him then to say that this is a grab by the Conservative Party is a Freudian slip of unusual proportions, even for him.
The other disturbing factor is that the right hon. Gentleman does not seem to know what harm he is doing by this Measure. He does not seem to appreciate that Parliamentary democracy in this country is not all that secure and firmly rooted and that there are elements —for example, the students who told one of our Select Committees that it was "bloody irrelevant"—who are cynical about our Parliamentary institutions. He does not seem aware of the enormous strength that he is giving to such elements if he introduces the concept that our elections are rigged. [Interruption.] He does not seem to appreciate that a Government who have already, by every clear indication, lost authority to govern and whom the electorate want to get rid of must move somewhat carefully if they are not to undermine something far more important than themselves; that is, the acceptance of Parliament by the people.
Once the idea is allowed to arise that we are not here as the result of fair and free elections—that we do not derive our authority from fair election by our fellow men—the right hon. Gentleman need not look beyond these islands to see the kind of circumstances that can arise.
The right hon. Gentleman is doing what I can only call an evil thing. Has he contemplated the effect of this example on the nascent Parliamentary democracies of the emerging Commonwealth? Has he reflected what this example must have on countries which are trying conscientiously, decently and honourably to emerge from tribalism to democratic government based on the Westminster pattern? What are they to think if they are told that here, at the centre and birthplace of democracy, a Minister can seek to salve 8 to 20 seals by a unilateral gerrymandering of our constitution?
The right hon. Gentleman says that he does not know what the electoral consequences of this will be. I believe that


he is Treasurer of the Labour Party. I wonder whether he is really telling us that he never asked the chief agent, that he ignored the reports submitted to officers of his party. The right hon. Gentleman knows that those who are unbiased in these matters—the commentators; the expert psephologists—[HON. MEMBERS: "Oh."]—not necessarily friends of my party—are all unanimous in the view that the result of these changes must be between eight and 20 seats for the Labour Party. [An HON. MEMBER: "Which is right."] I accept that—which is right. That is why this is being done. It will avail the right hon. Gentleman nothing, because all that he is doing is to add to the disapproval which the electorate has felt for this Government's incompetence the contempt which is now feels for their dishonesty.

11.1 a.m.

Mr. Michael Foot: The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) must know that his suggestion that my right hon. Friend the Secretary of State has introduced into these discussions about boundaries the charge of rigging is false, because the charge of rigging has been made on a number of occasions in the history of Britain. It was made against the party which sustained over so many years the seat of Old Sarum. It was made against the party which opposed the introduction of the Reform Bill of 1832. It was persisted in by Chartists and others through, out the 19th century.
It was renewed as recently as in the major debates that the House had on the boundary reports in 1954, when the charge of rigging was made against the Government of whom the right hon. Gentleman was a member and when the major boundary proposals of that time were rushed through the House with considerably less time than the House has been afforded for their discussion today. Therefore, the charge of rigging —whether false or true I will come to—has certainly not been introduced by any action of my right hon. Friend. It is one which has been thrown back and forth in the House for a long time.
The right hon. Gentleman ran away very fast—I think advisedly—from the revelation which was made that an approach was made to the Official Oppo-

sition in August, 1966. This was a revelation which was only dragged out of my right hon. Friend—even that was thought to be a very telling point on the side of the right hon. Member for Kingstonupon-Thames—because it is not the normal custom, as the right hon. Gentleman well knows, for matters which have been the subject of interchanges between the usual channels to be spoken of publicly in debate; for the very natural reason that, if all the discussions between the usual channels were made public, there would not be any point in having the usual channels.
Therefore, the right hon. Gentleman, the Tory Party and the country must understand that, as I understand it, way back in 1966 the proposal was made by the Government that some discussions should be initiated to consider whether there should be some amendment or alteration of the Parliamentary boundary position. Whatever charges hon. Members may make against me, I am interested in the prestige of the House of Commons. I think that it would have been much better for the health of democracy in Britain if that proposal from the Government had received a good response from the Opposition and if the matter could have been dealt with in that way. Further, I hope that following these debates there will be fresh discussions, perhaps in a different atmosphere, as to how in future we are to deal with some of these problems.
However, it should now be understood by the newspapers, which jump to conclusions in these matters so speedily, that the proposal for talks to deal with these matters in a much calmer atmosphere—not on the very eve of, or much nearer to, a General Election, but on the merits of the issue of co-ordinating the proposals and ideas relating to local government reform with proposals for parliamentary boundary reform—were initiated by the Government and were rejected by the Opposition, who now say that they would like these matters to be dealt with in a calmer atmosphere. This is an extremely important state of affairs.

Mr. Boyd-Carpenter: Will not the hon. Gentleman add, if he is suggesting—I have some sympathy with his suggestion —a method by which these matters should have been dealt with, that it


would have been better if the Government had come forward with specific suggestions when they decided to introduce the Bill—that is to say, earlier this year?

Mr. Foot: I appreciate that that can be argued, but it does not remove the importance of the initiative that was taken by the Government and which was rejected by the Opposition. The Government were perfectly entitled to come to the conclusion that, if a proposal of that nature which was made by the Government to the Opposition in a time of comparative political calm was rejected, it was all the more likely to be rejected if it had been made a few weeks ago.

Mr. Callaghan: My hon. Friend will recall that the propaganda barrage for the implementation of the Boundary Commission's Report started long before I was proposing to make any recommendations, because the Opposition knew what the Commissioners were proposing and they thought they could get something out of it.

Mr. Foot: The Opposition had been steaming it up for several months. My approach to the whole question has not been exactly the same as that of my right hon. Friend the Secretary of State, although I am glad that we reached generally agreeable conclusions about the matter. I am much more suspicious of the recommendations of Boundary Commissions than some hon. Members are, and I am much more insistent than some appear to be about the rights of the House of Commons to survey what parliamentary boundary commissions may report. I hope that we have made some approach with the Opposition on this question.
Last night, the hon. Member for Chichester (Mr. Chataway) made an extremely persuasive, most forceful, and well-argued speech, but the great part of it was devoted to saying that the Boundary Commission is a referee. If the Commission is a referee, not merely must its recommendations not be disputed, but they must not even be argued about; so, according to the hon. Gentleman, we should not even have had these discussions. So the ironic aspect of it is that, if the Opposition had had their way, we should have had a much more abbreviated debate than that which we have

had, which has been a much longer debate than the one which we were permitted to have in 1954.
The concept of the Boundary Commission being a kind of referee between the political parties on these matters is one that denies the supremacy of the House of Commons. This has been argued out on many occasions, but I return to the point. I know that the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) and others have poured scorn on my suggestion in this respect, because they have said, "We are not questioning the right of Parliament and of the House of Commons to examine or amend or alter the recommendations which may be made by the Boundary Commission. What we are concerned about is the statutory duty of the Secretary of State to present the Orders".
The more I hear that argument the more it makes me think, not merely that the operation of the Boundary Commissions needs to be examined afresh, but that the whole of the legislation within which we have been operating is very slipshod and extremely difficult to comprehend. If the theory of the right hon. and learned Member for Hertfordshire, East, is correct, the Home Secretary, instead of presenting the Bill, should have presented the Orders. If he happened to be against them in some particular or altogether, or because of their timing, presumably he should not have communicated that to the House by so much as the flicker of an eyelid, and certainly not by anything so heinous as a wink to the Patronage Secretary. The constitutional position as argued by hon. Members opposite, or implicit in their argument, is that the Home Secretary should have said to the House, "Here are the Orders arising from the reports of the Boundary Commissions. You must do what you like with them".
That is what I would describe as a constitutional outrage. It is a situation that we never tolerate in the House, particularly from a party like the party opposite and a newspaper like The Times, complaining about all the other Measures going through the House and saying that they should be presented by the Home Secretary and that we should have the considered view of the Home Office on


these intricate matters. Now the constitutional doctrine according to the legal authorities opposite, deriving from the 1944 and 1948 legislation, is that the only course is for my right hon. Friend to say, "These are the Orders. If I happen to be against them, I must not tell anybody. Nobody must know my views on them. The House can pass judgment on them". That would be an outrage of our normal procedures. If that is the correct interpretation of the legislation upon which we are acting, the sooner we revise the whole of it the better.
What my right hon. Friend rightly did, in contradistinction to that, was a much more open and fair way of dealing with the House and the country. Instead of presenting Orders in that manner, as he could have done on the interpretation of the law of hon. and learned Members opposite, he said, "Let us have a new Bill, setting out the position simply and plainly, and let the House argue on that basis." That was a way which enabled him to state a perfectly reputable argument, that major changes of Parliamentary boundaries should if possible be coordinated with changes in local government boundaries.
Instead of discussing those issues in this debate, we have had a deluge of invective from the Opposition. The right hon. and learned Member for St. Marylebone (Mr. Hogg) says that it gives him infinite pain to see the Labour Party united on the subject. But a sense of common interest has been detectable on the opposite side of the Committee. Hon. Members opposite seem to stick together like a bunch of melting lollipops. They say that it is all right for them to act together in these matters, but wrong for us—this from a party which in 1954, when it had a Boundary Commission's Report that it saw was very advantageous to it, drummed the changes through the House in a much shorter space of time than we have had on this Bill.
One of the chief persons who assisted it to do it was the present Leader of the Opposition, then known as a Lord Commissioner—a very apt title. I do not know whether he is still behaving as a Lord Commissioner. Maybe he is having consultations with them now, and that is why he cannot attend this Third Reading debate. Maybe he is in full

consultation with the people who want to sabotage the will of the elected representatives of the people.
We have had a deluge of invective. Hon. Members opposite talked about our debasing the currency, debasing democracy. What they have done is to debase the English language. In the whole history of Parliamentary conflict, never have there been such wild accusations made upon such flimsy evidence.
My prophecy is that after all this commotion, when the General Election is fought and won, all will be forgotten. All the discussions we have had will possibly figure solely as a footnote in a book from the Nuffield College, or something of that sort. The footnote may read, "Students of the ironies of politics may be interested to observe that, despite the spectacular victory of the Labour Party at the polls, the result was completely unaffected by the boundary changes one way or the other. This merely proves that politicians, like pollsters and psephologists cannot foretell the swings and the roundabouts. It may be said that the only certain consequence of those debates which caused such uproar was that the Home Secretary limited his majority in Cardiff, but that as he still has a good, thumping, 10.000 majority no greater tribute could be paid to his characteristic altruism."
This will be the end of the matter—so long as there is no interference with the elected representatives. A letter in The Times yesterday said that it would not be possible for this House to secure its will in the matter, because even the 1949 Parliament Act did not sufficiently tilt the balance in favour of the elected representatives of the people, and that if the Government wished to get the Bill through they might have to resort to the Tory trick of 1711 of creating peers. If the worst came to the worst, we might have to do it that way. But I hope that the House of Lords will understand, as I believe the people will understand, that there are many hon. Members on both sides of the House who wish to protect the reputation of Parliament.
If hon. Members opposite wish to debate that issue in the House or in the country, we are prepared to debate it with them. Certainly, we do not need instructions from Tories, either in this place or in any other, on how to build


democracy, because democracy had to build against them. That is the reality of the matter, and the reality of this debate.

11.17 a.m.

Sir D. Walker-Smith: I want to start with a brief reference to the serious point made earlier in the entertaining speech of the hon. Member for Ebbw Vale (Mr. Michael Foot). The legal and constitutional position, if I may say so without immodesty, remains as I tried to explain it to the hon. Gentleman and the House on Second Reading. He now appears reluctantly to accept my explanation. He has shifted his ground and says that in that case we should change the basic code in the 1949 Act. That is quite a different question, and has nothing to do with what is proposed in the Bill. It is a legitimate proposition that that could be discussed sometime, but it is not what we are here to discuss today.
It can sometimes be difficult for an Opposition to decide whether to divide against the Third Reading of a Bill, more particularly if two conditions exist: first, where there has been a difficult decision as to whether to oppose it on Second Reading; and secondly, where there has been a substantial improvement in the provisions of the Bill in its passage through the House. Neither of those conditions obtains here.
The decision to vote against the Second Reading was easy, because it is a bad Bill in every way—bad in its motivation, bad in its content, and bad in its effect. There has been no improvement, substantial or otherwise. There has been virtually no opportunity for any. We have had a guillotined Bill with a Government deaf to argument, impervious to reason, and resolved to have the Bill, the whole Bill and nothing but the Bill, cost what it may.
Make no mistake, it will cost a lot. Its cost will be heavy in its immediate effect and heavier still in its ulterior consequence. Its immediate effect is that it will throw onto the scrap heap all the devoted labours of the Boundary Commission over four years. It will postpone for an indefinite period an opportunity to obtain the maximum possible equity in electoral representation as assessed by a body chosen for its competence and objectivity.
It will prolong and aggravate the electoral disparities between constituencies and make it possible, before redistribution is at last achieved, for the votes of some citizens, when evaluated here in the Division Lobby to be equal only to one-sixth or one-eighth of others. The immediate effect of the Bill is very great. It has taxed in its defence even those hon. and right hon. Gentlemen opposite who, in their ingenuity and casuistry, are normally most adroit and adept at making the worst appear to be a better case. Bad as the Bill is in its immediate effect, its ulterior consequences will be far worse. The ultimate effect of the Bill will be to call in question the conventions of the constitution and put in peril the delicate mechanism which gears our parliamentary institutions to constitutional propriety.
It is indeed a delicate mechanism. Like so many British institutions, theory has to be interpreted, and can only be understood, in the light of practice. The theory is an unfettered sovereignty of Parliament. That, if I may remind the hon. Member for Ebbw Vale, means Parliament as a whole and not a single Chamber. In practice, the sovereignty of Parliament is exercised in accordance with the conventions of the constitution, conventions designed to prevent abuse by the Executive relying on an acquiescent though transient majority in the House of Commons. These restraints are partly statutory and partly conventional.
The restraints on the perpetuation of Parliament are statutory, to be found in the original Septennial Act, passed in the early days of Parliament—because it did not take long to discover that the Executive could use a temporary majority in Parliament for an abuse of power—and now by the Parliament Act 1911. The restraints that operate during the lifetime of a Parliament are, however, primarily conventional.
They are part of the unwritten but important conventions which in turn are part of our unwritten constitution. More than that, they represent the conditions on which we in this country can exceptionally enjoy the privilege of an unwritten constitution. It is an exceptional position. Most countries have deemed it necessary, or at any rate prudent, to incorporate provisions in written constitutions, normally known as entrenched clauses, to safeguard the basic liberties


and constitutional proprieties from assault or erosion by governments exploiting their transient majority in the legislature.
These entrenched provisions are powerful for the protection of the constitutional proprieties and the prevention of abuse, but up to now they have not been thought to be more powerful than our unwritten restraints operating here which, in the words of Burke, in another context, are
… light as air but strong as the links in a chain of iron.
Now that these conventions, the constitutional proprieties, are, as a result of this Bill, endangered—whether because the Government are ignorant or insensitive or arrogant or avid for power, I know not. This I do know: these conventions and proprieties are put in jeopardy by the Bill; and the constitutional implications are grave and far-reaching.
It has fallen to me from time to time to be asked in my professional capacity as a practising Queen's Counsel to give opinions on electoral and constitutional questions arising under the laws of the younger nations of the Commonwealth. In each case I have been concerned with interpreting the provisions of a written constitution, to determine whether certain actions are lawful or no. When doing so, observing I hope the objectivity and detachment appropriate to my professional function, I have felt a thrill of pride that in this country and in this Parliament, in which I have had the honour to serve for a number of years, such questions do not turn on the legal opinion of counsel or on the interpretation of the written constitution.
In this country, such answers are to be found not in the written law, but in the unwritten convention that Governments play fair and do not debase the high currency of Parliamentary institutions by manipulation for party gain. The day on which this ceases to be so will be a sad day for Britain. The provisions of this Bill, with its cynical substitution of party advantage for objective and judicial assessment, inevitably brings that day nearer. How much nearer is now a matter for those in another place. They will, I know, approach their task conscious of the great constitutional responsibility that rests on them. We

in the Commons House, in parting with this Bill, can only do our final duty by condemning it with voice and vote for the abject thing it is.

11.25 a.m.

Mr. Ben Whitaker: I want to take the opportunity of expressing very briefly why I have reservations about the Bill. I believe that there are some issues more important than party, and first among these I number democracy, and in particular Parliamentary democracy. It is said that the Tories would do exactly the same thing as we are doing. This may be so, but I believe that the Labour Party must be better than the Tories and that that is why many people support and work for the Labour Party, especially because of its history of fighting for democracy and the right to vote in this country and elsewhere overseas. In short, I believe that whether or not any political advantage accrues to either party upon the implementation of these proposals, a more important factor is that their implementation should be seen to be above suspicion.
There are arguments against the terms of reference of the Boundary Commission, that the implementation of the report should have been synchronised with Redcliffe-Maud, and that there should have been all-party consultations about any difficulties likely to arise. I submit that if one is to do these things they should have been done before the report was published. If one is to object to the jurisdiction of the court the time to do it is before the verdict and sentence are announced.
But I hope that we will be spared Conservative hypocrisy on this issue. A party which has connived and condoned real gerrymandering in Northern Ireland for so many years, not to speak of the business and the City of London vote which was in their political interest, should, we hope, that the decency to keep silent on this matter. One also hopes that those newspapers who are fulminating against the Government about this will ask themselves why they remained totally silent about the gerrymandering in Northern Ireland for so many years, until it recently became newsworthy.
Many people were equally unimpressed by the synthetic and selective indignation exhibited opposite about the guillotine


Motion. It is a historical fact that both Liberal and Conservative Governments have proportionately made use of the guillotine Motions on far more occasions than the Labour Party. Another incident which detracted from the credibility of the party opposite in its espousal of the cause of democracy, was the occasion in the debate when, after the right hon. Member the Leader of the Opposition having made one of his more vehement speeches, my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) rose to reply to him, but he was filibustered out of his opportunity of speaking by bogus points of order from the Opposition's henchmen, the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) and the hon. and gallant Member for Down. South (Captain Orr). These came surprisingly from a party purporting that its sole interest in this matter is the furtherance of democracy, and it is also something of an insulting reflection upon the Leader of the Opposition that they seemed to think he cannot risk being criticised by a humble back-bencher without protection from the Orange Order and the Police Federation spokesman.
I also totally reject the right of a mainly hereditary body of peers to interfere with this or, indeed, on any other issue whatsoever. When the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) was speaking about countries emerging from tribalism, he might have remembered that the hereditary system of peers is a form of tribalism which we should have got rid of a long time ago.
But I believe that the tu quoque argument is irrelevant. In politics there is far too much of pots and kettles calling each other black. Many people are getting increasingly tired of such performances. The implementation of the boundaries should be taken out of party politics and put into effect automatically at fixed periods of perhaps seven-year intervals. Equally, I believe that by-elections should be held within a statutory time limit of perhaps three months of a vacancy occurring. If these matters are to be decided in the House, a minimum requirement is that there should be a totally free vote on both sides.
It would be illogical to vote against this Bill, because its faults are those of omission rather than commission: it is

good as far as it goes, but I believe that it should go further. Therefore, I shall abstain.

11.30 a.m.

Mr. Sandys: The hon. Member for Hampstead (Mr. Whitaker), in his speech, clearly showed that he was deeply unhappy about, if not actively ashamed of, the way in which the Government are behaving. I thought that the Home Secretary also looked rather uncomfortable at the Dispatch Box this morning. There is no doubt that the Government and the Labour Party have every reason to be ashamed of what they are doing. During all the years that I have been a Member of the House, I cannot think of anything which has done more harm to the good name of Parliament and of politicians than this disreputable Measure.
The Bill has been described as squalid, dishonourable, dictatorial, fraudulent. The arguments which Ministers have advanced to justify the Bill have been described as dishonest, phony, and nauseating humbug. Every one of those epithets has been richly deserved.
In the face of this unrepresentative majority of political tricksters, there is nothing more that we on this side of the House can do. But, fortunately, there remains one institution which still has the power to safeguard our democratic traditions. Ministers are doing all that they can to intimidate the Upper House with threats, warnings and rumours. But we all know that it is nothing but bluff. The Government could never afford to risk a constitutional collision on this issue, in which the Lords would he defending not their own privileges, but the rights and liberties of the British people.
Finally, I wish to make it clear I am not opposing the Bill because that it will prejudice the prospects of my party at the next General Election. I am perfectly confident that, despite all their "fiddling", the Government will not be able to escape the fate which awaits them at the hands of the voters. I oppose the Bill because it is a barefaced swindle which perverts our constitutional conventions, defrauds the electors and brings discredit upon Parliament.

11.35 a.m.

Mr. Laurence Pavitt: Since the debate started this morning we


have heard from the heavyweight team of opposers. The right hon. Member for Streatham (Mr. Sandys) should get full marks for being able to get in the most number of epithets in the shortest possible time. Last in to bat was the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith), who weighed in with all the legal knowledge he commands. I prefer him on the Common Market than on this issue. Then we had that ebullient character the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who is always well to the fore if the Opposition are attacking the Government. And we always enjoy listening to the right hon. and learned Member for St. Marylebone (Mr. Hogg) because, against a drab and grey background, he brings a little colour to our proceedings. The noise and fury of political manoeuvring I leave to others to deal with.
I wish to address myself to a very small point and to try to protect my interests. I had one of the four but important debates which were left when the Guillotine fell yesterday. Both parties claim to care for the little man and the debate on the matter which I wished to raise would have been the smallest in the whole course of the Bill. Like my hon. Friend the Member for Brixton (Mr. Lipton), I wished to put a constituency point. We all feel that our constituencies are unique, but I would claim that the fact that my debate was selected by Mr. Speaker as one of the four last debates yesterday proves that I have a valid case to put forward and I would further argue that it is unique.
My predecessor, the late Sam Viant, was a Member of the House of Commons for 35 years. My constituency at that time was like the fashions of the day. The ladies had a single entity above the waist which was a bust and the Willesden constituency he served was a similar unity. What will happen as a result of the Bill is that I shall be given a constituency like two breasts with a large cleavage in the middle and never the twain shall meet. It may be more fashionable, but in terms of trying to organise two separate, complete areas which have no houses contingent upon each other is almost practically impossible, whichever way one looks at it. There is one bridge the Harrow Road

joining the two separate halves. My contention is that my constituency in the London Borough of Brent will emerge quite unique because of this Bill. There is no other constituency like it.
I accept the general contention of my right hon. Friend the Secretary of State that he must accept either all of the Boundary Commission's proposals for London or nothing. Therefore, to make a special pleading is a very difficult proposition. However, I hope that the matter with which I am concerned will be given further consideration before the Bill reaches the Statute Book.
Like my hon. Friend the Member for Brixton, I quarrel on the question of names. Willesden dates from the year 983. The parish church was built at the same time as Westminster Abbey. One thousand years of history is to disappear when the title of Willesden is no longer used. I am not concerned so much about the name of my constituency, because whatever its title it remains a good constituency.
… a rose
By any other name would smell as sweet.
This is not a question of political advantage. Schedule 6 will remain unaltered because the debate on my Amendment was prevented by the Guillotine. All my Amendment would have done would have been to change one politically Tory ward for another. The Labour vote for the defeated candidates in each of the wards was precisely the same—1,719—at the last municipal election in 1968. There is no political advantage. With an area in which the dividing line is an arterial road and in which there are no houses contiguous to each other, I repeat that organisationally one has an almost impossible situation.
One difficulty which we have faced, and which the Bill will hamper, is that we have tried in my borough to build up since the London Government Act an area in which we are moulding into one community two separate areas, namely, Wembley and Willesden. In listening to the speech which has just been made by the right hon. Member for Streatham, and his charge of gerrymandering, I was reminded of the fight that we put up over the London Government Bill, which was designed purely so that the Tory Party should occupy County Hall, on the other side of the river. I remember a speech


very similar to that made by my right hon. Friend the present Foreign and Commonwealth Secretary, who then led for us on that occasion and pointing out precisely the same arguments.
When the Home Secretary introduced the Bill to the House he made it clear that this was not a question of just putting a line on a map, but that we were talking in terms of living, human communities. I appeal to the House at this late stage of the Bill that in a constituency such as mine which has wide and varied aspects there should be an attempt to make the area with which we shall be left as a result of the provisions of the Bill a complete area, an entity.
On the social service aspect, I already have three hospitals in the constituency, and a fourth will come in as a result of the provisions of the Bill. The constituency of the hon. and gallant Gentleman the Member for Wembley North (Sir E. Bullus) will have no hospital at all. This is the kind of thing we should be debating rather than the sound and fury of the political arguments. The job of the House is to debate the issues in those kinds of terms. I regret that it has been necessary for the Opposition to find something to oppose—after all, it is their job to oppose—to make the maximum amount of political capital out of this legislation, rather than that the House should have debated the real issues, which would have been to its credit and would have been of great value to many Londoners.

11.45 a.m.

Mr. Hordern: The Government cannot pretend that the Bill is anything other than a disgraceful piece of political chicanery. The Government are bound by law to bring the proposals of the Boundary Commission before the House "as soon as may be". They have interpreted this as sometime, and, with luck, never. The Government are changing the law to suit their own political purpose.
Not a single newspaper or commentator of repute has given a favourable interpretation of the Government's actions. It is a serious matter when a newspaper of the standing of the New York Times writes a hostile opinion of the Government's proposals. Foreign opinion is very conscious that the Government have lost control of the Indus-

trial scene and have handed over control to the T.U.C. It also knows that the Government are in the hands of the bankers and are shackled by the International Monetary Fund.
It is a very serious matter when the proposals in the Bill bring into such serious doubt the Government's integrity. I was impressed by what was said by the hon. Member for Hampstead (Mr. Whitaker). The damage which will be done to this House and to Parliament will not be small. When the Conservative Party returns to power it will have to think seriously about introducing a Bill of Rights to remedy a great deal of the damage that has been done. But that is another matter.
What is much worse about the Bill is that discussion has been stilled by the Government's resort to the Guillotine. They have been afraid to face proper discussion; they have been afraid even to make sensible alterations in this noxious Bill. I would illustrate the point by referring to a comment made by the Home Secretary during the Second Reading debate. He said:
…it would not be the intention to fetter the Commissions any more tightly than they are now. If they felt that, in trying to give fairly equal representation, they would fulfil their duty by fixing one constituency, as I have said, at 43,000 and another at 75,000, and took the view that this was not going beyond their discretion, I would not feel that the same limit of tolerance would be beyond their discretion in trying to achieve the ideal of the approximately equal."—[OFFICIAL REPORT, 2nd July, 1969; Vol. 786, c. 457.]
Those remarks related to the provision in Clause 3 enjoining the Boundary Commission separately to consider my constituency and that of my hon. and gallant Friend the Member for Arundel and Shoreham (Captain Kerby) and providing that three constituencies should be made out of two of approximately equal size. We have never even reached Amendments dealing with this matter, and consequently this absurd proposal will remain in the Bill.
The Home Secretary has based such argument as he has been able to adduce on what he calls a principle. That principle is that we must await the implementation of the Redcliffe-Maud proposals. To rely on such a principle is similar to acting like a man caught with his hand in the till who says that he is simply there to mend the machine. There


is no principle in the Government's action on this Bill, except perhaps one, and that is to avoid, so far as it can be avoided, electoral damage.
The Government were conscious, however, that an effort must be seen to be made to reduce some of the alarming disparities and anomalies that have occurred during many years in which the Boundary Commission has considered the various constituencies in the country. It has sought to distract attention from the most serious anomalies, such as those in the constituency of my hon. Friend the Member for Meriden (Mr. Speed), of Birmingham, Ladywood and of Huyton, by drawing to the attention of the Boundary Commission three pairs of constituencies, of which my constituency and that of my hon. and gallant Friend the Member for Arundel and Shoreham happen to be one. If there were anything in the principle that we should wait for Maud, then it would have been wiser to have looked at the total effect of the Maud proposals on West Sussex.
It so happens that the boundaries suggested by Maud are somewhat different from those which at present obtain in West Sussex. But it is also the case that the two constituencies which are not affected at all by the Maud recommendations for the whole of West Sussex are Chichester and Worthing, and the two constituencies which are very seriously affected are those of my hon. Friend and myself.
It is certain that our two constituencies will be affected at some time in the future by the local government proposals of the Maud Report. Yet we are to be specially examined by the Boundary Commission and proposals will presumably be laid before the House and debated so as to form three constituencies out of two. Those three constituencies can only be considered as twilight constituencies. They cannot last as they are bound to be altered by the Redcliffe-Maud recommendations.
The position is more serious than that. Not only will they be affected by the Redcliffe-Maud recommendations, but I wish to know from the Minister of State what will be the position about the recommendations concerning the three new

constituencies which will be created out of my constituency and the constituency of Arundel and Shoreham.
The Bill clearly says in Clause 1(3,a) that the Home Secretary
shall lay before Parliament a draft of such an Order in Council for any part of the United Kingdom as soon as it appears to him that it would not, by reason of the prospect of local government reorganisation there, be premature to do so".
But the Boundary Commission is now being asked to draw three constituencies out of two. What will the Home Secretary do when he has the Boundary Commission's proposals before him? Will he at that time say, "I cannot lay the Orders before the House because they will be affected by the Redcliffe-Maud recommendations". If that is the case, what is the point of asking the Commission to examine the two constituencies at all? It is a serious matter to which I hope the Minister of State will reply.
Another matter in the Bill in connection with pairs of constituencies which seems to raise a vital constitutional issue is that the Government appear to be changing the Boundary Commission's terms of reference. Those terms of reference are laid down in the second Schedule to the 1949 Act, as amended by the 1958 Act, but this Bill allows only those sections which refer to the proceedings of the Boundary Commission in regard to the taking of public evidence, and so forth.
In other words, it appears from the Bill that the Boundary Commission is to have regard only to the approximate equality of electorate and nothing else. They are not to take into account those which may have been formed over many years and which are specifically mentioned in the Boundary Commission's report.
The Commission says:
Ties of many sorts may exist within this local community, and we believe it to be proper for these ties, wherever they may be, to be taken fully into account before a constituency is disturbed.
If the Bill is passed, they will not be allowed to take them into account, assuming that any understanding of it is right. Nor will they be allowed to take into account the prospect of future growth of the population. Here again, the Commission says in its report:
We cannot, however, escape the fact that the intention of the present law is that a


general review shall form the basis of constituency boundaries for at least the next ten years and it would therefore be desirable to make recommendations that would, so far as possible, cushion the effect of gains or losses of electorate so far as they could be foreseen with some degree of certainty. We had in mind that New Towns had been a major cause of the growth of electorates in several constituencies since the 1954 review.
In my constituency, I have the new town of Crawley. The recommendation of the Redcliffe-Maud Committee is that Crawley should go not into East Sussex, but into East Surrey. Yet, if the Bill is passed, the Boundary Commission will not be allowed even to consider that aspect of the matter. It will not be allowed to take into account the special report drawn up by the West Sussex County Council, which forecasts that the population of Crawley will be 81,000 in 1971 as a result of the crash housing programme. Nor can it take into account the fact that Crawley has a large proportion of young voters who, according to estimates which I have been given, already represent an additional 4,000 voters in the existing constituency. The Bill therefore hamstrings the Commission in the area which it has to examine, and it has tampered with its terms of reference.
The proposals for the dual constituencies are merely a desperate attempt by the Government to attain some sort of respectability for their overall proposals, in order to distract attention from the obvious anomalies such as Huyton and Birmingham, Ladywood. But they have failed to produce a convincing case even in this regard. It will be the epitaph of this Government that they have shown incompetence even in deceit.
For some years, I had the privilege of being assisted by the senior Conservative agent in the country. He retired a year ago. He told me that his experience of members of the Socialist Party was that however much he differed from their policies, and however much he felt they were misguided, he could not help having a sneaking respect for them as men. However, he said, about this Government, that he could not conceivably have any trust in them as men or in their proposals, and he added that he would not put it past this Government to try to extend their life. Nor would I.

11.55 a.m.

Mr. Albert Murray: A salient fact running through all our debates on the Bill is that we have not had any real argument from right hon. and hon. Gentlemen opposite. We have had a lot of words, "sordid", "cheat", "fraudulent", "chicanery", "gerrymander", "sham", "tricksters", and "nincompoop". We have also seen that gamblers 's instinct of the right hon. and learned Member for St. Marylebone (Mr. Hogg), who gambled on leaving the other place to come to this House, when he referred to "loaded dice".
I want to thank my right hon. Friend the Home Secretary because, apart from delivering to the House a very good Bill, he has given us an opportunity to see the best one-man show in town, plus supporting cast of paper tearers. The right hon. and learned Gentleman delivered a series of what might be described as "monohoggs", none of them with any serious argument to support it—[Laughter.] I am gratified for the right hon. and learned Gentleman's laughter, because he usually reserves his laughs for his own jokes, and quite rightly so, because it is the first time that he has heard them.

Mr. Hogg: The difference is that my jokes are funny.

Mr. Murray: As usual, the right hon. and learned Gentleman speaks only for himself. He used his great knowledge of Robert Louis Stevenson and has referred frequently to Dr. Jekyll and Mr. Hyde. I feel that he resembles another character from Robert Louis Stevenson in that he is a bit like Ben Gunn, marooned on his little island, perhaps waiting for something to turn up, and runing when he sees real people.
The right hon. and learned Gentleman has not produced any argument to show why the House should not accept the Bill. He dismisses the Redcliffe-Maud proposals. Anyone would think from his argument and those of his right hon. and hon. Friends, interspersed with abuse directed towards my right hon. Friends the Home Secretary and the Prime Minister, that the Boundary Commission had produced a magic document which would solve all our boundary problems. However, they have made no mention of the fact that in the Commissioners' proposals the present Isle of Thanet constituency would be roughly divided into


two, creating one constituency with an electorate of about 39,000 and another of 40,000, leaving untouched my own constituency which has an electorate of 78,000.
That is the kind of argument upon which they would have been better advised to concentrate, and they might have put forward suggestions for alterations in the terms of reference of the Boundary Commission to find new formulae and examine new constituencies. With our two-party system, the boundaries of our constituences should be more clearly defined, because in many cases great difficulties are created by the re-warding of constituencies.
The hon. Member for Horsham (Mr. Hordern) said that he had read an editorial about the Bill in the New York Times. As each of my 78,000 constituents opens the New York Times every morning to see what the Americans are now saying about the Boundary Commission, it is a constant source of excitement. To bring this sort of argument into our debate is ridiculous, and the Opposition know it.
They have tried to inflate the Government's proposals into some great electoral issue, and they have failed. I cannot speak for other hon. Members, but it would be interesting to know how many letters they have received on the subject. I have not received a single communication on this great constitutional issue which the Tories have tried to inflate.
They have brought in the Press, and spoken of that "great friend" of the Labour Party, William Rees Mogg, who has been writing such wonderful editorials about us. Right hon. and hon. Gentlemen opposite allege that they have taken note of everything written by the newspapers. They should try taking notice of the Press when they do their pools each week, because the papers are as right on these matters as they are in their football forecasts. I would suggest that the Press has been a little less than diligent in its approach to what is happening under these boundary proposals.
The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) spoke about Parliamentary democracy, how the Bill was dragging it down, and people were becoming cynical about it. The

Opposition talk about Parliamentary democracy. After the display that we had within the last week or two in Committee, when we had hon. Gentlemen going hysterical on the Opposition Front Bench, throwing Order Papers, shouting, and practically foaming at the mouth, can they still talk about Parliamentary democracy? On the occasion when my right hon. Friend the Secretary of State for Employment and Productivity was replying to the debate on industrial relations, do they remember the Parliamentary democracy that they showed? They would hardly let my right hon. Friend string one sentence after another without constant interruptions. Do they remember how they raised countless bogus points of order in Committee to stop the debate on this Bill continuing?

Mr. Deputy Speaker (Mr. Harry Gourlay): Order. The hon. Gentleman is straying a little from Third Reading.

Mr. Murray: I hope that I have not strayed too far. But I think that it needed saying. I apologise for straying a little.
With the Redcliffe-Maud proposals and the great changes that will take place in local government reorganisation within the next three or four years, it is absolutely necessary that these should run in line with changes in Parliamentary boundaries. Representing a constituency which will remain unaffected by boundary changes, it seems to me that if we are to change local government boundaries, with all that that entails, we ought to do it in a cohesive manner with changes in Parliamentary boundaries.
I shall give my wholehearted support to the Government on Third Reading.

12.1 p.m.

Sir Lionel Heald: I am grateful for the opportunity to briefly put forward the case for a considerable number of people who have not had any attention in the debate. That is largely due to the curtailment of the debate by our inability to reach, even by three o'clock this morning, a large number of Amendments, which were perfectly properly selected for discussion.
I ask the Home Secretary to consider the position of the 250,000 people who, in a year or two, will be the electors in West Surrey. At present, there are three constituencies there. First, Woking,


which has 85,000 electors, but will have over 100,000 in a year or two. Secondly, my own constituency, Chertsey, which now has 65,000 electors and will have 75,000. Thirdly, Esher, which will have the same number. Those electors have been told by the Boundary Commission that it is right and proper, in accordance with our parliamentary system, that there should be not three, but four Members of Parliament representing West Surrey. But they are now told that that is not to be. For how long? We just do not know. However, it seems clear from the discussions to which I have listened—and I have been here during the whole of the Committee stage—that it is likely to be for a considerable time.
I should like to explain why that is so. We are not affected in this connection by the Redcliffe-Maud proposals. On 27th June a statement was made in this House giving the constituencies which could be affected by the crossing of boundaries following the proposals of the Redcliffe-Maud Commission. None of these three constituencies that I have mentioned is affected. They will all go into one of these new areas of government. No one suggests the contrary.
The Title of the Bill states that it is to
Enable the alteration of parliamentary constituencies … to be suspended until the submission of the next general reports of the Boundary Commissions".
That is done in Clause 1, subject only to subsection (3), which states:
No recommendation shall be made to Her Majesty to make an Order in Council … but the Secretary of State
(a) shall lay before Parliament a draft of such an Order in Council for any part of the United Kingdom as soon as it appears to him that it would not, by reason of the prospect of local government reorganisation there, be premature to do so".I understood that the Home Secretary yesterday contemplated that that might be about 1972.
Let us consider how that affects those electors about whom I am speaking. It is not premature today to put into force those new boundaries which will enable them to have four Parliamentary representatives instead of three. Therefore, there is not the slightest reason in logic or in principle why it should not be done now.
With this marvellous principle that is supposed to apply, when we get down to

Horsham, which is not far away, we find that there will be no difficulty about doing it there, despite the fact that it has not got the advantage of the recommendations of the Redcliffe-Maud Commission. So the thing is hopelessly illogical.
If we were told that Clause 1(3)(a) would enable this matter to be dealt with right away by somebody saying, "Here are these Surrey constituencies; everybody is agreed; nobody raises the slightest objection; there is no complication or difficulty", then why cannot it be done? But, I do not think that it can be done, because it talks about
any part of the United Kingdom as soon as it appears to him that it would not, by reason of the prospect of local government reorganisation there, be premature to do so".
It is clear that the Clause has not been drafted with the intention of covering the kind of case about which I am concerned. I do not think that it can or that it is meant to do so. Therefore, we must not pretend that that is what is happening.
I do not wish to occupy too much time. I know that many other hon. Members wish to speak, and I am conscious that I must not take advantage of rights which are sometimes doubted.
We must not forget that there will be a large number of young electors who will want to exercise their votes in a constitutional and democratic way. There is no necessity and no desire on their part to wait for the Redcliffe-Maud proposals, and they do not want the country to be led down the garden by the Home Secretary.

12.9 p.m.

Mr. Molloy: The Conservative Opposition have made an enormous gamble on this entire issue. It will probably have a nine-day wonder dividend for them, but that is about all. They have jettisoned and relinquished their proper rôle as an Opposition in this Parliament. They have been obsessed with trying to get some form of political advantage from a first glance at the Bill. They should have examined it more deeply and then dismissed the first attitude which they adopted of trying to play this up for some political advantage.
Even under the Guillotine the Opposition had a responsibility to see that the Amendments were organised in such a


way that as many of them as possible could be dealt with. But because of their myopia, and their blind fury, which started as a kind of synthetic fury but developed into a genuine fury because they could see that they were not putting forward a cogent argument, their position as a responsible Opposition deteriorated with each hour of the debate.
I have the greatest respect for a number of hon. Gentlemen opposite, and particularly for the right hon. and learned Member for St. Marylebone (Mr. Hogg), but I think that they have tarnished their reputations to a remarkable degree. We have all admired the remarkable stand made by the right hon. and learned Gentleman on such issues as race and democracy overseas, and it is a great shame that he has departed from those high standards today. He did so merely because he was serving his party rather than his nation. That is a serious charge that I have to make against the right hon. and learned Gentleman, but I make it sincerely.
I hope, however, that I shall soon be able to recover my high regard for the right hon. and learned Gentleman. Today, he was gracious enough to give way to me when we were discussing the built-in advantage which the Conservative Party has always had, particularly in Ulster, but in departing from his usual standard in an effort to find a cogent reply to my comment he delved into what was almost personal rudeness, which is uncharacteristic of him on a serious issue.
There is a feeling among hon. Gentlemen opposite that they are really the champions of democracy. I regret that the right hon. Member for Streatham (Mr. Sandys) is not in his place. Listening to the right hon. Gentleman this morning, one would have thought that he was a radical trade unionist fighting for the rights of the workers in the 19th century, rather than a member of a party which resisted any form of democratic change.
Right hon. and hon. Gentlemen opposite know that the reason why we have taken so long to achieve real democracy in this country is that it has been opposed by their party and by people of their ilk. We sometimes tend to forget that we have had a form of Parliamentary

government for nearly 700 years, but that we did not get Parliamentary democracy until 1928. I am proud to say that that was the result of the great endeavours of the Labour Party and the trade union movement, to which I belong.
The Opposition have revealed the paucity of their case. They have been trying to show that they are unsullied democratic virgins who are being attacked by a vicious Government. We know that really they are a bunch of artful haggard harridans. They concentrated their attack on the Huyton constituency, the seat of my right hon. Friend the Prime Minister. It is noteworthy that the form of attack by the Opposition has been used by the Tory Party on only two previous occasions. Once was when they lashed and poured scorn on Winston Churchill, and the second occasion was when they did the same to Aneurin Bevan. Now it is my right hon. Friend the Prime Minister.
I believe that what we have seen is a lesson for the people of this country, because, as Winston Churchill would probably have said, what he have seen is the lashing of the "Imperial Tory pint" for the "Tory Preservation Society". When that sort of thing happens, we realise what people mean when they talk about the slops of politics.
There are some aspects of the Commission's report which ought to have been discussed, and which could have been had we had reasonably intelligent opposition from the party opposite. I discover from the rules set out in Appendix A, paragraph 3 of the Commission's Second Report that
There shall continue to be a constituency which shall include the whole of the City of London and the name of which shall refer to the City of London.
That is a rule. There is no argument, and no debate, about that. My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) referred to the absurdity of regarding the Commission as a sort of referee, and he was right. This is a daft argument, yet the Commission has taken on the rôle of referee which it has no right to adopt.

Sir D. Renton: The hon. Gentleman is wrong. The rule to which he refers was laid down in the Statute passed by the Labour Government in 1949.

Mr. Molloy: That is not so. Perhaps the right hon. and learned Gentleman will look at Appendix A of the report.
I wish to draw attention to the situation in Ealing. Both the minority Labour Party and the majority Conservative Party on the council—and these are people who are involved in local government and have a deep knowledge of the area and of the community—can show statistically, and from a community point of view, that there ought to be four Parliamentary constituencies in that borough. They are united in this view and for sound statistical reasons allied to realistic forecasts.
I turn now to draw attention to some remarkable statements in this report. One London borough which is credited with having a notional entitlement of 2.5 constituencies is to have three constituencies, whereas Ealing, with a notional entitlement of 3-54 constituencies, is also to have only three constituencies. It is this kind of thing which ought to be debated and examined by Parliament, instead of being accepted merely because it is suggested in the report.
The report says, on page 10:
In deciding to allocate four seats to Bromley (entitlement 3·53), but only three each to Southwark (entitlement 3·56) and to Ealing (entitlement 3·53),—
Ealing had 82 electors fewer than Bromley at that time—it has increased its electorate since—
we took account of the fact that the electorates of Southwark and Ealing had been falling, whereas in Bromley the electorate was growing.
I do not know the situation in Southwark, but I do know the situation in Ealing. This is not a criticism of the people who made the examination. For a time they were right. The curve dropped, then flattened, and then began to climb again. The forecast shows an increase in the Ealing electorate. The figures still are increasing. In paragraph 57, the Commission said:
We recognise that forecasts of future population trends left plenty of room for speculation and debate.
I will say it did. Before that, the Commission said:
Planned development might produce some 2,000 additional electors.
I believe that there is a cast-iron case for Ealing to have four constituencies.

I am joined in this by the Conservative Council in Ealing, the Labour opposition and many other people. So I hope that the seriousness of this situation will be considered earnestly by the Under-Secretary, and the matter put right.

12.21 p.m.

Mr. Reader Harris (Heston and Isle-worth): I hope that the hon. Member for Ealing, North (Mr. Molloy) will forgive me if I do not follow him in detail, but in principle I support him, since much the same situation as he has described applies to Hounslow. The most surprising words uttered this morning were those of the Home Secretary, that this whole matter was a naked attempt by the Conservative Party to grab seats. When I point out that the Bill would abolish my seat, hon. Members will agree that those words are ironical music in my ears.
I shall be voting against the Bill, but perhaps for the opposite reasons from those of the rest of my party. They are voting against it because it does not introduce enough of the Boundary Commission's proposals, whereas I am doing so because it introduces too many. I cannot believe that it is right to introduce these alterations in Greater London. Although that area is not affected by Redcliffe-Maud, I believe that, in the next five years, the Commission will have to consider the local government boundaries there. These have not been considered for a long time. Certainly, in South-west Middlesex, there needs to be a fresh appraisal of the local government boundaries, certainly those between Hounslow and Twickenham, where the present boundaries are anomalous and administratively inconvenient.
The unfortunate thing is that the Bill covers two separate items: first, the timing of the introduction of the Boundary Commission proposals; and, second, those proposals themselves. The hon. Member for Ebbw Vale (Mr. Michael Foot) made great play with the fact that more time has been given on this occasion to the Boundary Commission alterations than in 1954. That may be technically correct, but in 1954 the whole thing was handled quite differently. Each alteration to a Parliamentary constituency was embodied in a Statutory Instrument, every one of which was laid before the House in the normal way. They were all considered


separately and I believe that we sat all night to do so. Although it was rather tedious, any hon. Member with a complaint at least was not denied the opportunity to make his views on the subject known.
On this occasion, of course, there has been no chance to consider the individual proposals. In my case, they are particularly bad, because the constituency of Heston and Isleworth is being abolished, despite the fact that, after a public inquiry in 1964, the Boundary Commission's inspector recommended no change in the number of constituencies in Hounslow. We managed to convince him that three should continue and he recommended to the Boundary Commissioners accordingly, making just a few small alterations in the boundaries. This recommendation has been overruled and, naturally, there is some small feeling on the subject.
The matter is made all the more ludicrous by the fact that when I was elected in 1950, I had a constituency of 74,000 and the present Boundary Commission proposals are that two seats should be set up, one of 70,000 and one of 75,000, despite the fact that the inspector accepted the evidence of the local authority and others that there would be an enormous amount of development in Hounslow in the next 10 years—£55 million development planned for Brentford, large developments in Heston and Isleworth and a large redevolpment in Feltham. I predict that, in 10 years, they will have to restore the three seats. I have here a cutting from the local newspaper which says that 8,700 new council homes are planned over the next 10 years.
This is a bad proposal. What makes it all the more extraordinary and makes us think that the Commission has not given it proper consideration, is that a strong case was made, if there were to be two constituencies for at any rate not calling them by the unwieldy names of, first Hounslow, Brentford and Isleworth, and second, Hounslow, Feltham and Heston. With full local support, it was suggested that these should be changed to Hounslow, East and Hounslow, West. I have something in common with the hon. Member for Brixton (Mr. Lipton), who complained about the name of his constituency being changed.
I do not know whether it is too late to ask whether this matter should be further considered—I suppose it is—but at least this does not have support in my borough and the decision has been taken against the advice of the Commission's inspector, after a public inquiry.

12.26 p.m.

Mr. John Ellis: Whatever one may say about the speech of the hon. Member for Heston and Isle-worth (Mr. Reader Harris), at least he argued the case in his own locality. The rest of the debate has shown a tendency —I am sorry that the right hon. Member for Streatham (Mr. Sandys) is not here, because he excels in this—to use as many epithets as possible. The main point of this is a political exercise.
An example is Bristol, a city with great pride. These proposals would reduce its representation from six Members to five. My constituency is not affected by these proposals, yet the Tory Party makes comments there. They have taken up the general gambit which has been offered. In the City of London, it is all right, because it has tradition. When the right hon. Member for Streatham prayed in aid the House of Lords, the debate sank to a new low. Members of the Party opposite are now the great democrats who, throughout their history, have stopped us often from even voting at all.
I will not go into the disgraceful scenes last Tuesday. This was a carefully arranged political fake. Right hon. and hon. Gentlemen opposite could have stopped that announcement being made at 10 o'clock. It was in Adojurnment time. I am just a humble back bencher. I do not listen to the Whips on both sides—

Mr. Deputy Speaker: Order. The hon. Gentleman is straying a little from Third Reading.

Mr. Ellis: I am trying to show that the arguments given are not the real reasons. Last Tuesday night—

Mr. Deputy Speaker: Order. The hon. Member must try to show why he supports or does not support the Bill.

Mr. Ellis: I support the Bill if for no other reason than what I saw last Tuesday night. What I saw was a political campaign, which is entirely wrong. When I


saw the Chief Whip on the other side waving down points of order because the statement had to be made, and saying "Wait for it, boys; we have to have the rest of the statement of the Leader of the House first," I know that that was political fakery. That is what they have done today and throughout these debates. This is nicely timed and the so-called democrats will even pray in aid the House of Lords. I am not falling for it: neither will the country.

12.30 p.m.

Sir D. Renton: Like nearly all his hon. Friends, the hon. Member for Bristol, North-West (Mr. Ellis) did not say a word to justify the Bill. He merely sought to attack the Opposition. Indeed, it is fair to summarise this morning's debate by saying that our attack on the Bill has been mainly a defence of the constitution while the Government's defence of the Bill has been mainly an attack on the Opposition.
If the Bill gets a Third Reading—which, with the help of the Patronage Secretary, it will no doubt do—this will be a sad and bad day for parliamentary democracy. As my hon. Friends—too few of whom have had an opportunity to speak in this short debate—have pointed out, the Bill must be considered in the light of the constitutional principles which have been created and accepted by all parties. Into the constitution, safeguards have been built by common consent to prevent politicians who have a temporary spell with a majority in this House from using that majority for their unfair advantage. These safeguards are intended to save us from ourselves when we happen to have a brief spell in power. It is through these safeguards that we are saved from the accusation that we become judges in our own cause.
This is my answer to the remarks of the hon. Member for Ebbw Vale (Mr. Michael Foot), who I pick out not because of his fiery eloquence but because he was the only hon. Gentleman opposite who, in an articulate way, tried to deal with the constitutional point at issue. I ask him to bear in mind that it is essential for us to have a system under which Ministers not only clearly act constitutionally, but can be seen to do so. The Bill deliberately sweeps aside these safeguards and, by doing that, puts the clock back.
There are two Cabinet Ministers—one is in the House and the other would be here but for having to be absent because of a State occasion—who are, perhaps above all others apart from the Prime Minister, responsible for protecting the constitution. They are the Leader of the House and the Home Secretary, and each has failed us miserably.
The Leader of the House has introduced the meanest and toughest guillotine timetable in the history of Parliament. The hon. Member for Ebbw Vale invited us to compare it with what happened when the Orders were being discussed in 1954. The position is clear. In 1954, four long days of Parliamentary sittings were allocated to, and were well used by, hon. Members on both sides. On this occasion the Committee stage was squeezed into two days, on one of which we were severely provoked, and there is not to be a Report stage. The circumstances are, therefore, not comparable.

Mr. Michael Foot: I entirely dispute that there were four days. There were two days and the time allotted on this occasion has been much more extensive than the time allotted for the last major boundary occasion.

Sir D. Renton: The record is clear on this matter. The hon. Gentleman may have overlooked the fact that there were two separate occasions of discussion in 1954. That may have confused him. I understand that a total of four days was available on the last occasion.

Mr. Foot: indicated dissent.

Sir D. Renton: The Bill begins by placing the Home Secretary above the law as he found it when the Boundary Commission's Reports were presented; and to that extent the Bill is retrospective and, therefore, to be deplored. By refusing to accept those reports, except in respect of London, the Government have made themselves judges in their own cause.
The excuse that the Redcliffe-Maud recommendations make it impracticable to follow the Boundary Commission's Reports is a transparently bogus afterthought. In a candid speech, in which he said that he would abstain, the hon. Member for Hampstead (Mr. Whitaker) came close to saying this, but in kinder


words. I say it is an afterthought, because when the Royal Commission was appointed in 1966 the Boundary Commission had already started its recent general review, which was overdue. It was due to report this year, but nothing was said to Parliament in 1966 or later about postponing or not accepting the Commission's recommendations. These elaborate inquiries went forward, with all the cost and trouble which they entailed for all concerned.
The Home Secretary mentioned a private approach that had been made through the usual channels. I understand that such an approach was made, but let us consider its character. It was a suggestion that we, the Opposition, should in effect connive with the Government in ignoring the statutory procedures laid down for the Boundary Commission, procedures on which it had already embarked. In other words, were were asked by the Government to join with them in breaking the law. [Interruption.] We very naturally would not agree to do so.
I am told that no suggestion was made during those negotiations that a Bill might be presented. In accordance with the law, the Boundary Commission went ahead and reached conclusions in its general review. Then the Government considered the proposals. They found that the umpire's decision meant that the Government might not be able to go on batting indefinitely, so they would not accept the umpire's decision, with the result that we have this miserable Bill. That is why the Redcliffe-Maud excuse is a feeble afterthought.
This excuse becomes even more transparently bogus when we consider the certain effect of postponing the Boundary Commission's proposals, or ignoring them altogether, and the uncertainty which attaches to implementing the Redcliffe-Maud Report. It is in this context that one should remember that the Government have never said that they fully accept the Maud Report. Qualified statements have been made to the effect that they accept some of its broad intentions, but there is no certainty that this excuse will ever become valid.
The present boundaries are mostly 15 years old. If the Bill becomes law—the Home Secretary agreed with this yesterday—we will still have the present

boundaries, with all the anomalies, along after the next election. In this connection, I cannot help drawing the attention of the House to a revealing slip of the tongue made by the Home Secretary—I hope that it was only a slip of the tongue and that it did not reveal the true state of his mind—when he said, somewhat naїvely, "Conservatives believe that there is bound to be an election" —[HON. MEMBERS: "Oh."] If hon. Members do not like that reference to what the Home Secretary said, they must talk it over with him. Slip of the tongue though it was, it could be regarded as a revealing attitude on his part.
The Bill ensures that the present boundaries, with all their anomalies, will remain until some time after the next General Election, and perhaps for a long time after, because, in accordance with the terms of the Bill, it may not be until the General Election after next at the very earliest, provided that the next Parliament runs for a fairly full course, that we shall have a general review which ends the present anomalies, which will meanwhile grow and grow.
Clause 3 and Schedule 2 give the Government's whole case away; they reveal the probable basic and true reason for the Bill. Despite the Redcliffe-Maud excuse, four pairs of constituencies which now have more than 90,000 electors each, plus Cheadle with over 100,000 electors, are to be considered forthwith by the Boundary Commission. My hon. Friend the Member for Horsham (Mr. Hordern) asked some questions on this matter which must be answered. I hope that the Under-Secretary will answer them.
My hon. Friend, referring to Clause 3 (1)(a) and (b), said that the Government appear, by the wording of the Clause, which was never discussed in Committee, to change the terms of reference of the Boundary Commissions which were laid down by Statute in 1949. My hon. Friend points out in particular that future growth is to be ignored. The rules set out in the Schedule to the 1949 Act oblige the Boundary Commission to take various matters into consideration. There is nothing in the Bill which says that the Commission is to ignore those matters but there is no Amendment to the Bill which reconciles the contents of the Schedule to the 1949 Act with Clause 3.
What are the Government up to when, ignoring all that has gone before, they rule arbitrarily that the Commission is apparently to have regard simply to the question that the constituencies shall have "approximately equal electorates"? There are other constituencies which are just as large as those mentioned but which are not included. It would not be in order for me, in spite of this wide-ranging debate, to consider them in general, but at this late stage of the debate we should be told why a constituency of 92,500 electors is left alone instead of the Commission's recommendation being accepted?
There is perhaps, however, no need to press the Under-Secretary to say what will make him blush to do so, as it no doubt will; but it is a fact that these constituencies have been chosen in place of Huyton, and it would seem that the Prime Minister has so little confidence in the electors of Huyton or of any other constituency, as it is perfectly clear that the electors have no confidence in him; and that perhaps is the true and basic reason for this ignominious Bill.

Mr. Charles Pannell: On a point of order. I am sorry to intrude in the debate. I shall not take long, but I wish to raise a matter of some consequence. The Sessional Order of the House granting access to Members is being impinged upon this morning. It is no use anyone saying that there is a State visit involved, because it is at moments of inconvenience that we have to vindicate our rights here.
The origin of the Sessional Order was when the Crown kept parties of troops running round this place to stop Members from getting in. This morning, in Bridge Street, the police are trying to carry out a difficult duty, but they have stopped the approaches to Westminster Bridge. Members of Parliament have to get out of their cars and, by leave, are allowed to come through. The police are trying to do their best, but I want it to be perfectly clear by one o'clock that the access of Members of Parliament is guaranteed. At present, they are being re-routed up the Embankment to somewhere up towards Trafalgar Square.
This is what Parliament is all about. If there is to be talk about great constitutional principles, we had better vindicate one here this morning. Parlia-

ment has called itself together this morning. I have great respect for State visits and such things, but occasionally we should remind people that we are a sovereign Parliament.

Mr. Peart: On learning that this point was to be raised I checked with the police. The police are co-operating fully. Members will not be impeded in any way. An instruction has been sent out, in view of the sitting.

Colonel Sir Tufton Beamish: Further to that point of order—

Mr. Deputy Speaker (Mr. Harry Gourlay): Perhaps I should deal with the point of order first. It may help if I clarify the position. The point which has been raised is not a point of order arising in this debate, nor is it a matter of privilege. Perhaps the best way in which the Chair could help hon. Members is by suggesting that they may raise the matter with the appropriate authorities, or with the Home Secretary.

Sir T. Beamish: Further to that point of order. I have arrived at this very moment. I came from Pall Mall. I was given every facility by the police to come straight to the House. As soon as I explained to a sergeant on several occasions that I had to get to the House, I was allowed straight through.

Sir Harmar Nicholls: On a point of order. Is not this a case where the Chair should intervene to stop the Leader of the House from jerkily altering the business for selfish reasons and upsetting everybody?

Mr. Deputy Speaker: I should be obliged if the hon. Gentleman would not raise facetious points under the guise of points of order.

Captain Walter Elliot: The right hon. Member for Leeds, West (Mr. C. Pannell), who, we know, is well versed in procedure, has raised a most important point, namely, that Members have been obstructed from coming to the House, as I understood him to say. If that is so, surely that throws doubt on the validity of the debate that many of us have been here all morning for.

Mr. Deputy Speaker: Order. I have already ruled on the point of order and I cannot hear a further submission. The


facts are as I have stated, and the Leader of the House has given an assurance that the police have been instructed to facilitate the passage of Members to the Palace of Westminster.

12.48 p.m.

Mr. Merlyn Rees: After much discussion, after a great deal of heat, after the expression of a great deal of personal spite against my right hon. Friend the Prime Minister, and after much use of words such as "gerrymandering" and "rigging", we have come to the end of the debate on the Bill. I am very glad that it emerged this morning that there were consultations between the Government and the Opposition in 1966.
As a relatively new Member of the House, what sparked me off last evening into believing that something should be said about the consultations was when my hon. Friend the Member for Rushcliffe (Mr. Gardner) said:
When the decision to set up the Royal Commission was made 
it was wrong not to announce
 that the boundaries decision would be put off until after the Redcliffe-Maud Report.
That is what my hon. Friend said. Then my right hon. Friend said this:
In the light of those" Hear, hears, "it would be interesting to know whether the Opposition would have agreed at that time to it being put off.
The right hon. and learned Member for St. Marylebone (Mr. Hogg) said:
The right hon. Gentleman never tried it, and the fact that he never tried it shows that he is in bad faith.
I acquit the right hon. and learned Gentleman of knowing that the discussions took place with the Shadow Cabinet, but he should have known. To say that my right hon. Friend acted in bad faith when it has been revealed this morning that discussions took place goes beyond saying, "Nincompoop". That is good dormitory stuff, but the right hon. and learned Gentleman should apologise for saying that my right hon. Friend was acting in bad faith, in view of what was revealed this morning.

Mr. Hogg: The hon. Gentleman is perfectly right to say that I was unaware that there had been any conversations when I said what I did. But I have made inquiries, and since he has raised

the matter I must say that apparently there was a private conversation between the then two Chief Whips in which the simple inquiry was made whether we would agree to the postponement of the Boundary Commission. We said "No", and that left the Government free to legislate then. I therefore repeat my charge of bad faith.

Mr. Rees: In that case, it might be as well if I made clear what happened. Following the setting up of the Royal Commission on Local Government, in 1966, the then Lord President discussed with the then Opposition Chief Whip in August, 1966, the possibility of suspending the work of the Boundary Commission, because their recommendations would be based on local government boundaries which were liable to be altered as a result of the recommendations of the Royal Commission. On 8th August, 1966, the Opposition Chief Whip informed the Lord President of the Council that the Shadow Cabinet felt unable to agree to a standstill. To say that my right hon. Friend acted in had faith in the face of that ill becomes the right hon. and learned Gentleman.

Hon. Members: He should withdraw.

Mr. Rees: There has been a great deal of discussion during the past two days about the first part of the Bill, under which no action is to be taken on the reports for England and Wales by the Boundary Commission, and no further reports will be made before the next general report. I would like to emphasise the assurance—I accept, as far as it can go—given by my right hon. Friend last night that when, in the early 1970s, the facts as to what is to happen in local government are known, with the aid of shadow local authorities, based on the experience we have had in the London area, after the London Government Act, the Government will move and the Boundary Commission will then be able to investigate and suggest boundary changes in accord with the local government changes which are to take place in the country as a whole.
The right hon. and learned Member for Chertsey (Sir L. Heald) asked about changes in North-West Surrey. The question is whether it is or is not premature to reactivate the Commission for any part of the United Kingdom on


account of the prospect of local government reorganisation. North-West Surrey is no different from any other area. We have acted in London because local government reform has been carried out there. We know that has to be done, but this is not the situation in North-West Surrey.
My hon. Friend the Member for Ealing, North (Mr. Malloy), others of my hon. Friends and the hon. Member for Heston and Isleworth (Mr. Reader Harris) raised the question of what will happen in their areas, because they felt that the Boundary Commission's recommendations had been wrong. The Report of the Boundary Commission is based on the figures of 1965, but the way in which we do things with regard to constituency boundary changes means that almost inevitably by the time the report is published the figures on which it is based are four years out of date. In the London area, the situation will be exactly the same as it would have been had the reports been implemented in the country as a whole.
That means that if any local organisation has any views to express about constituency boundaries in that area, they are entitled to approach the Boundary Commissioners, who are still in being. This applies not only in Ealing, but in other parts of the London area.
The hon. Member for Horsham (Mr. Hordern) raised the question of his own area, and I am willing to discuss it with him later. Clause 3(2) provides for the recommendations contained in the Report of the Commission submitted under this Clause to be dealt with in the same way as under the 1949 Act. The Report is to be laid before Parliament together with a draft Order in Council giving effect, with or without modifications, to the recommendations of the Boundary Commissioners, which will be put to the House and be subject, I think, to the affirmative Resolution procedure.
The Government's conclusion in the face of the impending changes in local government was that outside the Greater London area, where the local Government changes are known, the recommendations of the Boundary Commission, with the exceptions of which the House is

fully aware, should not be implemented. The wisdom of the House today, in the full knowledge of that, is greater than in 1958, when the discussions took place before. It is fully in the power of the House to take account of this matter.
Throughout the debate and in speeches at the weekend, what have we had? Whatever the right hon. and learned Gentleman says, we have not had the argument that there might be local government changes, but that one should not deal with the matter in this way. Time and again we have had accusations of gerrymandering and abuse of my right hon. Friend from hon. Members opposite. No one has given figures—not even the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who is skilled in these matters. He has said that informed opinion believes it to be advantageous to the Labour Party to do it in this way.
Nowhere have the figures been published, because any figures that would be published are subjective. There is no objective analysis. It is like a review of an American book on the Civil War, which says "This is an objective account of the American Civil War from the Southern point of view". Whichever party office publishes the figures, it is a subjective valuation. My right hon. Friend has made it clear that there are other factors to take into account.
So what do we have? The number of seats quoted ranges from 20 to six. Nobody says whether it means three seats, meaning six on a 1964 basis. There is not a ha'porth of evidence to encourage right hon. Gentlemen opposite to use the word "gerrymandering" That is what they believe, but it is a subjective analysis and not the sort of objective analysis that can go to another place.
Compared with the great constitutional issues that have gone to another place over the past 100 years, what will happen now? We shall have a Conservative Central Office brief sent to the other place saying that there is gerrymandering. We have gone from the days of its being the poodle of Mr. Balfour. What the Opposition are asking is for another place to be the poodle of the Conservative Central Office.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 287, Noes 234.

Division No. 326.]
AYES
ll.0 p.m.


Abse, Leo
Evans, Albert (Islington, S.W.)
Lewis, Ron (Carlisle)


Albu, Austen
Evans, Fred (Caerphilly)
Lipton, Marcus


Allaun, Frank (Salford, E.)
Evans, Ioan L. (Birm'h'm, Yardley)
Lomas, Kenneth


Alldritt, Walter
Faulds, Andrew
Loughlin, Charles


Anderson, Donald
Fernyhough, E.
Mabon, Dr. J. Dickson


Armstrong, Ernest
Finch, Harold
McCann, John


Ashley, Jack
Fletcher, Rt.Hn.SirEric (Islington,E.)
MacColl, James


Ashton, Joe (Bassetlaw)
Fletcher, Raymond (Ilkeston)
Macdonald, A. H.


Atkins, Ronald (Preston, N.)
Fletcher, Ted (Darlington)
McGuire, Michael


Atkinson, Norman (Tottenham)
Foley, Maurice
McKay, Mrs. Margaret


Bacon, Rt. Hn. Alice
Foot, Rt. Hn. Sir Dingle (Ipswich)
Mackenzie, Gregor (Rutherglen)


Bagier, Gordon A. T.
Ford, Ben
Mackintosh, John P.


Barnett, Joel
Forrester, John
Maclennan, Robert


Baxter, William
Fowler, Gerry
MacMillan, Malcolm (Western Isles)


Bence, Cyril
Fraser, John (Norwood)
McMillan, Tom (Glasgow, C.)


Benn, Rt. Hn. Anthony Wedgwood
Freeson, Reginald
McNamara, J. Kevin


Bidwell, Sydney
Galpern, Sir Myer
Mahon, Peter (Preston, S.)


Binns, John
Gardner, Tony
Mahon, Simon (Bootle)


Bishop, E. S.
Garrett, W. E.
Mallalieu, E. L. (Brigg)


Blackburn, F.
Ginsburg, David
Mallalieu,J.P.W.(Huddersfield,E.)


Boardman, H. (Leigh)
Gordon Walker, Rt. Hn. P. C.
Manuel, Archie


Booth, Albert
Gray, Dr. Hugh (Yarmouth)
Mapp, Charles


Bottomley, Rt. Hn. Arthur
Gregory, Arnold
Marks, Kenneth


Boyden, James
Grey, Charles (Durham)
Marquand, David


Bradley, Tom
Griffiths, David (Rother Valley)
Marsh, Rt. Hn. Richard


Bray, Dr. Jeremy
Griffiths, Eddie (Brightside)
Mason, Rt. Hn. Roy


Broughton, Sir Alfred
Griffiths, Will (Exchange)
Maxwell, Robert


Brown, Hugh D. (G'gow, Provan)
Gunter, Rt. Hn. R. J.
Mayhew, Christopher


Brown, Bob(N'c'tle-upon-Tyne, W.)
Hamilton, James (Bothwell)
Mellish, Rt. Hn. Robert


Brown, R. W. (Shoreditch &amp; F'bury)
Hamilton, William (Fife, W.)
Mendelson, John


Buchan, Norman
Hamling, William
Mikardo, Ian


Buchanan, Richard (G'gow, Sp'burn)
Hannan, William
Millan, Bruce


Butler, Herbert (Hackney, C.)
Harper, Joseph
Miller, Dr. M. S.


Butler, Mrs. Joyce (Wood Green)
Harrison, Walter (Wakefield)
Milne, Edward (Blyth)


Callaghan, Rt. Hn. James
Hart, Rt. Hn. Judith
Mitchell, R. C. (S'th'pton, Test)


Cant, R. B.
Haseldine, Norman
Molloy, William


Carmichael, Neil
Hattersley, Roy
Moonman, Eric


Carter-Jones, Lewis
Hazell, Bert
Morgan, Elystan (Cardiganshire)


Castle, Rt. Hn. Barbara
Healey, Rt. Hn. Denis
Morris, Alfred (Wythanshawe)


Chapman, Donald
Heffer, Eric S.
Morris, Charles R. (Openshaw)


Concannon, J. D.
Henig, Stanley
Morris, John (Aberavon)


Conian, Bernard
Hilton, W. S.
Moyle, Roland


Craddock, George (Bradford, S.)
Hooley, Frank
Mulley, Rt. Hn. Frederick


Crawshaw, Richard
Houghton, Rt. Hn. Douglas
Murray, Albert


Cronin, John
Howarth, Harry (Wellingborough)
Neal, Harold


Crosland, Rt. Hn. Anthony
Howarth, Robert (Bolton, E.)
Newens, Stan


Crossman, Rt. Hn. Richard
Howell, Denis (Small Heath)
Oakes, Gordon


Dalyell, Tam
Howie, w.
Ogden, Eric


Davidson, Arthur (Accrington)
Hoy, Rt. Hn. James
O'Malley, Brian


Davies, Ednyfed Hudson (Conway)
Hughes, Rt. Hn. Cledwyn(Anglesey)
Oram, Albert E.


Davies, G. Elfed (Rhondda, E.)
Hughes, Hector (Aberdeen, N.)
Orbach, Maurice


Davies, Dr. Ernest (Stretford)
Hughes, Roy (Newport)
Orme, Stanley


Davies, Rt. Hn. Harold (Leek)
Hunter, Adam
Oswald, Thomas


Davies, Ifor (Gower)
Irvine, Sir Arthur (Edge Hill)
Owen, Dr. David (Plymouth, S'tn)


de Freitas, Rt. Hn. Sir Geoffrey
Jackson, Colin (B'h'se &amp; Spenb'gh)
Owen, Will (Morpeth)


Delargy, Hugh
Janner, Sir Barnett
Page, Derek (King's Lynn)


Dell, Edmund
Jay, Rt. Hn. Douglas
Palmer, Arthur


Dempsey, James
Jeger, George (Goole)
Pannell, Rt. Hn. Charles


Dewar, Donald
Jeger, Mrs. Lena(H'b'n &amp; St.P'cras,S.)
Park, Trevor


Diamond, Rt. Hn. John
Jenkins, Hugh (Putney)
Parker, John (Dagenham)


Dickens, James
Jenkins, Rt. Hn. Roy (Stechford)
Parkyn, Brian (Bedford)


Dobson, Ray
Johnson, Carol (Lewisham, S.)
Pavitt, Laurence


Doig, Peter
Johnson, James (K'ston-on-Hull, W.)
Pearson, Arthur (Pontypridd)


Driberg, Tom
Jones, Dan (Burnley)
Peart, Rt. Hn. Fred


Dunn, James A.
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Pentland, Norman


Dunnett, Jack
Jones, J. Idwal (Wrexham)
Perry, Ernest G. (Battersea, S.)


Dunwoody, Mrs. Gwyneth (Exeter)
Jones, T. Alec (Rhondda, West)
Perry, George H. (Nottingham, S.)


Dunwoody, Dr. John (F'th &amp; C'b'e)
Judd, Frank
Prentice, Rt. Hn. Reg


Eadie, Alex
Kelley, Richard
Price, Christopher (Perry Barr)


Edelman, Maurice
Kerr, Dr. David (W'worth, Central)
Price, Thomas (Westhoushton)


Edwards, Robert (Bilston)
Kerr, Russell (Feltham)
Price, William (Rugby)


Edwards, William (Merioneth)
Lawson, George
Probert, Arthur


Ellis, John
Leadbitter, Ted
Pursey, Cmdr. Harry


English, Michael
Lee, Rt. Hn. Frederick (Newton)
Randall, Harry


Ennals, David
Lee, Rt. Hn. Jennie (Cannock)
Rankin, John


Ensor, David
Lewis, Arthur (W. Ham, N.)
Rees, Merlyn



Lever, Rt. Hn. Harold (Cheetham)





Richard, Ivor
Spriggs, Leslie
Weitzman, David


Roberts, Albert (Normanton)
Steele, Thomas (Dunbartonshire, W.)
Wellbeloved, James


Roberts, Rt. Hn. Goronwy
Stonehouse, Rt. Hn. John
Wells, William (Walsall, N.)


Roberts, Gwilym (Bedfordshire, S.)
Strauss, Rt. Hn. G. R.
Whitlock, William


Robertson, John (Paisley)
Summerskill, Hn. Dr. Shirley
Wilkins, W. A.


Robinson, Rt.Hn.Kenneth(St.P'c'as)
Swain, Thomas
Willey, Rt. Hn. Frederick


Rodgers, William (Stockton)
Symonds, J. B.
Williams, Alan (Swansea, W.)


Roebuck, Roy
Taverne, Dick
Williams, Alan Lee (Hornchurch)


Rogers, George (Kensington, N.)
Thomas, Rt. Hn. George
Williams, Clifford (Abertillery)


Ross, Rt. Hn. William
Thomson, Rt. Hn. George
Williams, Mrs. Shirley (Hitchin)


Ryan, John
Thornton, Ernest
Willis, Rt. Hn. George


Shaw, Arnold (Ilford, S.)
Tinn, James
Wilson, Rt. Hn. Harold (Huyton)


Sheldon, Robert
Tomney, Frank
Wilson, William (Coventry, S.)


Shinwell, Rt. Hn. E.
Tuck, Raphael
Winnick, David


Shore, Rt. Hn. Peter (Stepney)
Urwin, T. W.
Woodburn, Rt. Hn. A.


Short, Rt.Hn.Edward(N'c'tle-u-Tyne)
Varley, Eric G.
Woof, Robert


Silkin, Rt. Hn. John (Deptford)
Wainwright, Edwin (Dearne Valley)
Wyatt, Woodrow


Silverman, Julius
Walker, Harold (Doncaster)



Slater, Joseph
Wallace, George
TELLERS FOR THE AYES:


Small, William
Watkins, David (Consett)
Mr. Alan Fitch and Mr. Neil McBride.


Snow, Julian
Watkins, Tudor (Brecon &amp; Radnor)





NOES


Alison, Michael (Barkston Ash)
Doughty, Charles
Jones, Arthur (Northants, S.)


Allason, James (Hemel Hempstead)
du Cann, Rt. Hn. Edward
Jopling, Michael


Amery, Rt. Hn. Julian
Eden, Sir John
Joseph, Rt. Hn. Sir Keith


Astor, John
Elliot, Capt. Walter (Carshalton)
Kerby, Capt, Henry


Atkins, Humphrey (M't'n &amp; M'd'n)
Elliott, R.W.(N'c'tle-upon-Tyne,N.)
Kershaw, Anthony


Baker, Kenneth (Acton)
Emery, Peter
Kimball, Marcus


Baker, W. H. K. (Banff)
Errington, Sir Eric
King, Evelyn (Dorset, S.)


Barber, Rt. Hn. Anthony
Ewing, Mrs. Winifred
Kirk, Peter


Batsford, Brian
Eyre, Reginald
Kitson, Timothy


Beamish, Col. Sir Tufton
Farr, John
Knight, Mrs. Jill


Bell, Ronald
Fisher, Nigel
Lambton, Viscount


Bennett, Sir Frederic (Torquay)
Fletcher-Cooke, Charles
Lancaster, Col. C. G.


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Fortescue, Tim
Lane, David


Berry, Hn. Anthony
Foster, Sir John
Legge-Bourke, Sir Harry


Biffen, John
Fraser, Rt.Hn.Hugh(St'fford &amp; Stone)
Lewis, Kenneth (Rutland)


Biggs-Davison, John
Galbraith, Hn. T. G.
Lloyd, Rt. Hn. Selwyn (Wirral)


Birch, Rt. Hn. Nigel
Gibson-Watt, David
Longden, Gilbert


Black, Sir Cyril
Gilmour, Ian (Norfolk, C.)
Lubbock, Eric


Blaker, Peter
Gilmour, Sir John (Fife, E.)
McAdden, Sir Stephen


Boardman, Tom (Leicester, S.W.)
Glover, Sir Douglas
MacArthur, Ian


Body, Richard
Glyn, Sir Richard
Maclean, Sir Filzroy


Bossom, Sir Clive
Godber, Rt. Hn. J. B.
Macleod, Rt. Hn. Iain


Boyd-Carpenter, Rt. Hn. John
Goodhart, Philip
McMaster, Stanley


Boyle, Rt. Hn. Sir Edward
Goodhew, Victor
Macmillan, Maurice (Farnham)


Braine, Bernard
Gower, Raymond
McNair-Wilson, Michael


Brewis, John
Grieve, Percy
McNair-Wilson, Patrick (New Forest)


Brinton, Sir Tatton
Griffiths, Eldon (Bury St. Edmunds)
Maddan, Martin


Bromley-Davenport, Lt.-Col. Sir Walter
Grimond, Rt. Hn. J.
Marples, Rt. Hn. Ernest


Bruce-Gardyne, J.
Gurden, Harold
Marten, Neil


Bryan, Paul
Hall, John (Wycombe)
Mawby, Ray


Buchanan-Smith, Alick(Angus, N&amp;M)
Hall-Davis, A. G. F.
Maxwell-Hyslop, R. J.


Buck, Antony (Colchester)
Hamilton, Lord (Fermanagh)
Mills, Peter (Torrington)


Bullus, Sir Eric
Hamilton, Michael (Salisbury)
Mills, Stratton (Belfast, N.)


Burden, F. A.
Harris, Frederic (Croydon, N.W.)
Miscampbell, Norman


Campbell, B. (Oldham, W.)
Harris, Reader (Heston)
Mitchell, David (Basingstoke)


Campbell, Gordon (Moray &amp; Nairn)
Harrison, Brian (Maldon)
Monro, Hector


Carr, Rt. Hn. Robert
Harvey, Sir Arthur Vere
Montgomery, Fergus


Channon, H. P. G.
Harvie Anderson, Miss
Morgan-Giles, Rear-Adm.


Chataway, Christopher
Hawkins, Paul
Morrison, Charles (Devizes)


Chichester-Clark, R.
Hay, John
Mott-Radclyffe, Sir Charles


Clark, Henry
Heald, Rt. Hn. Sir Lionel
Munro-Lucas-Tooth, Sir Hugh


Clegg, Walter
Heath, Rt. Hn. Edward
Murton, Oscar


Cooke, Robert
Heseltine, Michael
Nabarro, Sir Gerald


Cooper-Key, Sir Neill
Higgins, Terence L.
Neave, Airey


Cordle, John
Hiley, Joseph
Nicholls, Sir Harmar


Corfield, F. V.
Hill, J. E. B.
Noble, Rt. Hn. Michael


Costain, A. P.
Hirst, Geoffrey
Nott, John


Craddock, Sir Berosford (Spelthorne)
Hogg, Rt. Hn. Quintin
Onslow, Cranley


Crouch, David
Holland, Phillip
Orr, Capt. L. P. S.


Cunningham, Sir Knox
Hordern, Peter
Orr-Ewing, Sir Ian


Currie, G. B. H.
Hornby, Richard
Osborne, Sir Cyril (Louth)


Dalkeith, Earl of
Howell, David (Guildford)
Page, Graham (Crosby)


Dance, James
Hunt, John
Page, John (Harrow, W.)


d'Avigdor-Goldsmid, Sir Henry
Hutchison, Michael Clark
Pearson, Sir Frank (Clitheroe)


Deedes, Rt. Hn. W. F. (Ashford)
Iremonger, T. L.
Peel, John


Digby, Simon Wingfield
Irvine, Bryant Godman (Rye)
Percival, Ian


Dodds-Parker, Douglas
Jenkin, Patrick (Woodford)
Peyton, John



Jennings, J. C. (Burton)
Pike, Miss Mervyn







Pink, R. Bonner
Scott-Hopkins, James
Wainwright, Richard (Colne Valley)


Pounder, Rafton
Sharples, Richard
Walker, Peter (Worcester)


Powell, Rt. Hn. J. Enoch
Shaw, Michael (Sc'b'gh &amp; Whitby)
Walker-Smith, Rt. Hn. Sir Derek


Price, David (Eastleigh)
Silvester, Frederick
Walters, Dennis


Prior, J. M. L.
Sinclair, Sir George
Ward, Dame Irene


Pym, Francis
Smith, Dudley (W'wick&amp; L'mington)
Weatherill, Bernard


Quennell, Miss J. M.
Speed, Keith
Wells, John (Maidstone)


Ramsden, Rt. Hn. James
Steel, David (Roxburgh)
Whitelaw, Rt. Hn. William


Rawlinson, Rt. Hn. Sir Peter
Stodart, Anthony
Wiggin, A. W.


Renton, Rt. Hn. Sir David
Stoddart-Scott, Col. Sir M.
Williams, Donald (Dudley)


Rhys Williams, Sir Brandon
Tapsell, Peter
Wilson, Geoffrey (Truro)


Ridley, Hn. Nicholas
Taylor, Sir Charles (Eastbourne)
Wolrige-Gordon, Patrick


Ridsdale, Julian
Taylor,Edward M.(G'gow,Cathcart)
Wood, Rt. Hn. Richard


Rippon, Rt. Hn. Geoffrey
Taylor, Frank (Moss Side)
Woodnutt, Mark


Robson Brown, Sir William
Temple, John M.
Wortley, Marcus


Rodgers, Sir John (Sevenoaks)
Thatcher, Mrs. Margaret
Wylic, N. R.


Rossi, Hugh (Hornsey)
Tilney, John
Younger, Hn. George


Royle, Anthony
Turton, Rt. Hn. R. H.



Russell, Sir Ronald
van Straubenzee, W. R.
TELLERS FOR THE NOES:


St. John-Stevas, Norman
Vaughan-Morgan, Rt. Hn. Sir John
Mr. Jasper More and Mr. Anthony Grant.


Sandys, Rt. Hn. D.
Vickers, Dame Joan



Scott, Nicholas
Waddington, David

Bill accordingly read the Third time and passed.


ADJOURNMENT


The Business having been concluded, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.


Adjourned accordingly at ten minutes past One o'clock, p.m.

Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

YORK CORPORATION BILL

CITY OF LONDON (VARIOUS POWERS) BILL

Lords Amendments considered and agreed to.

WITHAM NAVIGATION COMPANY BILL [Lords]

Read the Third time and passed, with Amendments.

SAINT STEPHEN, CLAPHAM PARK BILL [Lords]

BEDFORD CORPORATION BILL [Lords]

As amended, considered; to be read the Third time.

BLACKPOOL CORPORATION BILL [Lords]

As amended to be considered upon Thursday.

KIDDERMINSTER CORPORATION BILL [Lords]

As amended, considered; Amendments made to the Bill; Bill to be read the Third time.

WORCESTERSHIRE COUNTY COUNCIL BILL [Lords]

Read a Second time and committed.

EAST GREEN, ABERDEEN ORDER CONFIRMATION BILL

FORTH PORTS AUTHORITY ORDER CONFIRMATION BILL

CLYDE PORTS AUTHORITY ORDER CONFIRMATION BILL

Read a Second time; to be considered Tomorrow.

Oral Answers to Questions — PUBLIC BUILDING AND WORKS

Army Catering Corps Tower Building, Aldershot

Sir E. Errington: asked the Minister of Public Building and Works what circumstances caused the unsatisfactory conditions of piping in the new tower building of the Army Catering Corps, Aldershot; when this will be put right; and at what cost.

The Minister of Public Building and Works (Mr. John Silkin): We have found that the type of plastic piping used in the waste water disposal system of this building can be damaged by very hot water. As the building contains a large number of kitchens, the plastic piping must be replaced with metal pipes. The work will be put right at the same time as other work yet to be completed on the project, and is estimated to cost £38,000. The building will be occupied in March, 1970.

Sir E. Errington: Is the right hon. Gentleman aware that the top floor is completely unusable, although the lower floor can be used, and what steps is he taking to avoid this happening in the future?

Mr. Silkin: On the general construction of the building, there will be no delay in the ultimate completion of the work. In reply to the second part of the supplementary question, the matter is now being investigated, and I would not like at this stage to make any further comment.

Willems Park, Aldershot

Sir E. Errington: asked the Minister of Public Building and Works why no steps have been taken at Willems Park, Aldershot, since October, 1968 when the attention of the Ministry of Defence was drawn to the inadequate height of the top floor parapet, with consequent danger to young children; and whether he will ensure that this will be remedied without waiting for the proposed strengthening of the whole building.

Mr. John Silkin: I am grateful to the hon. Member for drawing my attention to this point. We propose to fix a railing to the tops to make them safer. I am arranging for the railings to be fixed as soon as possible.

Sir E. Errington: May I ask the right hon. Gentleman why there has been this delay? This matter was brought to the attention of the Ministry of Defence in October last, and there is a grave risk that children playing on the top parapet may fall over. May I be assured that This will not await the general strengthening of the flats at Willems Park?

Mr. Silkin: It was intended that it should await the general strengthening, but I have come to the conclusion that, in view of the time lag, it should be put into operation earlier. At the time when the right hon. and learned Member for Hexham (Mr. R ippon) gave the original instructions for the height of the balustrades, the height given was 3 ft. 6 in. This has been increased, on my instructions, to about 4 ft. 3 in., and we hope that this will remedy the matter.

Mr. Crawskaw: Is my right hon. Friend aware that the matters raised in the last two Questions have caused great concern about the people responsible for giving specifications for these projects? Will my right hon. Friend look into the matter, and perhaps deal with people who specify pipes that are not adequate to take hot water?

Mr. Silkin: In reply to the hon. Member for Aldershot (Sir E. Errington) I said that the matter was subject to investigation.

Construction Industry (Productivity)

Mr. Waddington: asked the Minister of Public Building and Works whether he will make a statement on the productivity of the construction industry since the suspension of building controls.

Mr. John Silkin: Between the fourth quarter of 1968 and the first quarter of 1969 productivity on all new work fell by about 5 per cent.

Mr. Waddington: Do not these figures reveal that the industry has suffered a setback in spite of the abolition of building controls? Does it not appear to suggest that building controls when in opera-

tion were not serving any useful purpose and were not stopping the overheating?

Mr. Silkin: I think that the figures show demonstrably that Great Britain has a winter. A fall of about 5 per cent. is not unusual.

Winter Building

Mr. Waddington: asked the Minister of Public Building and Works whether he will make a statement on the progress of winter building.

Mr. John Silkin: I would refer the hon. Gentleman to the answer given by my predecessor to a similar Question by the hon. Member for Richmond, Yorks (Mr. Kitson) on 22nd April this year.—[Vol. 782, c. 242]

Mr. Waddington: Does not the Minister feel that progress is impeded by the operation of investment grants and by the rule that no grant can be given for capital expenditure on one item of less than £25? Does it not affect in particular site lighting, which is an important matter in this context?

Mr. Silkin: That point is made from time to time, but investment grants equally are available for winter building equipment or assemblies of equipment costing over £25. Even if no grant is forthcoming, all the evidence is that there is an increase in productivity to be gained from winter building techniques. This by itself should be a stimulus to the employment of these techniques.

Public Buildings (Cleaning)

Mr. Dudley Smith: asked the Minister of Public Building and Works how many public buildings coming under his supervision have been cleaned in the past three years; and at what estimated cost.

The Parliamentary Secretary to the Ministry of Public Building and Works (Mr. Charles Loughlin): All or major parts of twelve buildings have been cleaned and work has begun on one more. In addition, Trafalgar Square, notably Nelson's Column, and the Wellington Arch have been cleaned. The total cost so far is some £70,000.

Mr. Dudley Smith: Is the Parliamentary Secretary aware that these cleaning operations are much appreciated by visitors to London and also by those who


pass them every day? Is it not now logical that the lists of buildings to be cleaned should include the most important building of all, the Palace of Westminster?

Mr. Loughlin: I agree that the cleaning of buildings is desirable since they are an amenity. But we have the task of maintaining buildings, and the maintenance of buildings costs a lot of money. We can undertake only a certain amount of cleaning in any given year.

Mr. Whitaker: In view of the tremendous benefits to tourism and the excellent results in Whitehall and Trafalgar Square, will my hon. Friend also consider cleaning the British Museum and Buckingham Palace?

Mr. Loughlin: The 1969–70 programme includes a start on the Mall facade of Buckingham Palace, and the House will accept that Buckingham Palace itself is a great tourist attraction. We shall also be undertaking work on the Royal Naval College, the Tower of London, the old Register House in Edinburgh, and Gwydyr House. I do not think we can do more at this stage.

Mr. Kitson: Although I appreciate how necessary it is to undertake the cleaning, would it not be of advantage if we were to reduce the pigeon population in Trafalgar Square?

Mr. Loughlin: It would be an advantage to reduce the pigeon population, but an enormous number of authorities have attempted to get rid of birds of one kind or another and it is an intractable problem.

State Building Corporation

Mr. Peyton: asked the Minister of Public Building and Works whether he will now give an assurance that no legislation to set up a state building corporation will be introduced during the life of the present Parliament.

Mr. John Silkin: No, Sir.

Mr. Peyton: Why not? Surely the right hon. Gentleman must accept that the Government have already embraced almost every form of human folly, without their now adding this one.

Mr. Silkin: The hon. Gentleman asked me a Question to which I gave a correct

answer. I am not at present considering any legislation. But even on a day as hot as this I do not see why I should commit myself totally to inertia.

Building Construction Industry (Selective Employment Tax)

Mr. Peyton: asked the Minister of Public Building and Works what progress he has made in providing an assistant for Professor Reddaway of Cambridge University to assist him in his inquiry into the impact of selective employment tax on the construction industry.

Mr. Loughlin: We hope that an announcement can be made shortly about this appointment.

Mr. Peyton: Patience is all very well, but how long does one have to wait? How long has this inquiry got to continue digging and digging for truth, truth that is already very well known; namely that the selective employment tax is a damnable affair for everybody, particularly the construction industry?

Mr. Loughlin: The hon. Gentleman has a tendency to use exaggerated language and to get hysterical about things. The situation is simply that we have had to try to get the right kind of person to fill this appointment. Both the major organisations in the construction industry accept that Professor Reddaway is the right person under whom this particular problem should be investigated. We think we have the right type of person, but are not yet in a position to make an announcement.

Mr. Chichester-Clark: Is not this about 18 months too late, far too late, in view of the fact that the construction industry pays 25 per cent. of the yield from this tax?

Mr. Loughlin: I appreciate that there has been a delay, but I can assure the House that there has been no dragging of feet so far as we are concerned. We have simply been trying to get the right person to do this particular job. We think we have now got that person, and we will make an announcement as soon as we can.

Mr. Peyton: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of that reply, I give notice that I wish to raise the matter again on the Adjournment.

Mr. Chichester-Clark: asked the Minister of Public Building and Works whether he will now make a statement on the effects of selective employment tax on the civil engineering industry, and, in particular, on fixed price contracts without a fluctuation clause.

Mr. Biggs-Davison: asked the Minister of Public Building and Works what representations he has now received from the civil engineering industry against selective employment tax; and what reply he has sent.

Mr. John Silkin: I have nothing to add to the answer I gave on 10th June to a similar Question from the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor).—[Vol. 784, c. 1214.]

Mr. Chichester-Clark: What is the cause of the delay? It is only a question of basic justice. Can we get on with it and have a decision?

Mr. Silkin: The hon. Gentleman should not be more impatient than the Federation. Discussions are going on. As soon as I am in a position to give a definitive answer, I will.

Mr. Biggs-Davison: Has not selective employment tax been in existence now for three years? Should not the private sector be on the same basis as the public sector? Will the Minister assure the House that there will be no question of referring anything to the National Board for Prices and Incomes?

Mr. Silkin: I can confirm that selective employment tax has been in existence for three years.

Mr. Biggs-Davison: Will the right hon. Gentleman answer the rest of my question?

Mr. Speaker: Mr. Jopting. No. 14.

Mr. Jopling: rose—

Mr. Biggs-Davison: On a point of order, Mr. Speaker—

Mr. Speaker: Order. I have called the next Question.

Mr. Speed: asked the Minister of Public Building and Works in respect of how many building workers engaged on public contracts selective employment tax is payable; and what effect he estimates the tax has had on their output.

Mr. John Silkin: The tax is payable without refund in respect of about 65,000 operatives of public sector direct labour organisations and such of the 490,000 contractors' operatives engaged in public sector contracts. Between 1967 and 1968 output per operative rose sharply, but it is not possible to quantify the extent to which this is a conseqeunce of S.E.T.

Mr. Speed: Can the right hon. Gentleman say what benefit accrues to the public sector by having additional costs to the tune of approximately £80 million per year as a result of S.E.T.?

Mr. Silkin: I should think that there were considerable benefits to the economy by the—I am not quite sure what the word is—aggregation of S.E.T.

Mr. Chichester-Clark: Can the Minister say how, for the purposes of refund, local authorities are expected to differentiate between their operatives engaged on new work and those engaged on maintenance, especially as the Government do not know what the benefit from the tax actually is?

Mr. Silkin: There is a considerable benefit from the tax. I should think that there was a very clear and general division between operatives employed on new work and operatives employed on maintenance—at any rate, clear enough for the local authorities concerned.

Government Office Building Programme

Mr. Costain: asked the Minister of Public Building and Works whether he will now outline his policy regarding the proposal of the Estimates Committee that he should introduce legislation to amend the Commissioners of Works Act, 1852.

Mr. Clark Hutchison: asked the Minister of Public Building and Works what progress he has made with his review of the possibility of making firmer advance commitments of the Government's office building programme; and whether he will make a statement.

Mr. Loughlin: My right hon. Friend is awaiting the outcome of an interdepartmental working party.

Mr. Costain: Since on 11th March it was announced that the Ministry was looking into the matter, will not the Minister take away some of the inertia


he has mentioned and say whether or not he finds favour with the proposal? How many Parliamentary Questions do we have to put down before something is done?

Mr. Loughlin: I am surprised that the hon. Gentleman is now becoming so impetuous; it is out of character. This issue involves a major judgment in carrying through the policy of our Department, which in one way or another costs a good deal of money. The Estimates Committee made a recommendation; we have set up an inter-departmental committee to examine it, and we cannot move until we have examined it.

Mr. Clark Hutchison: Is the Scottish Office represented on this inter-departmental committee, and what representations has it made?

Mr. Loughlin: I am extremely sorry but I do not know. [HON. MEMBERS: "Oh."] I will make inquiries and write to the hon. Gentleman.

Building Research Station (Study Projects)

Mr. Costain: asked the Minister of Public Building and Works what are his general criteria for selecting projects for study by the Building Research Station.

Mr. Loughlin: New projects at the Building Research Station must be relevant to the needs of the building user, of central or local government or of the industry. They must offer reasonable prospects of success; and the station should be demonstrably the most suitable place for them.

Mr. Costain: Does the Parliamentary Secretary agree with Mr. MacDougall's statement that the Building Research Station should operate at the bounds of knowledge? Does he appreciate that only about one-fifth of the projects undertaken by the Building Research Station have commercial possibilities?

Mr. Loughlin: The hon. Gentleman ought to be careful since the Building Research Station is doing an extremely good job of work. This is accepted by the building industry. There is a steering committee at the station on which the industry itself is represented, and if it has any objections to the projects that we have in hand it will make known

its opposition. The hon. Gentleman ought to do his homework on this matter.

Building Industry (Self-employed Men)

Mr. Boyd-Carpeniter: asked the Minister of Public Building and Works what plans he has to introduce legislation to implement the recommendations of the Phelps Brown Report regarding self-employed men; and when he proposes to publish a White Paper outlining the terms of it.

Mr. Currie: asked the Minister of Public Building and Works whether he will now make a statement on the proposed legislation on cont-actual liability for self-employed men working in the building industry; and when he proposes to introduce it.

Mr. John Silkin: I have nothing to add to my Answer of 10th June to similar Questions by the hon. Members for Rushcliffe (Mr. Gardner) and Meriden (Mr. Speed).—[Vol. 784, c. 1204–6.]

Mr. Boyd-Carpenter: In view of the right hon. Gentleman's self-proclaimed dynamism and in view of the importance of this problem, is it not time that some progress was being made?

Mr. Silkin: I agree with the right hon. Gentleman that, in view of my lack of inertia, it is time that there was some progress in this matter. I am at present discussing the whole question with my colleagues, and I hope to be in a position in the not too far distant future to give a definitive answer.

Mr. Currie: Does not the Minister realise that this is totally inadequate and typical of the delays of this Government in construction legislation? Will he get a move on?

Mr. Silkin: Perhaps it would be as well to teach the hon. Gentleman a little history. The Phelps Brown proposals were published in July, 1968. The first and most important essential obviously was to get the views of both sides of the industry. These were received in February, 1969. From that moment to this, urgent discussions have been taking place. I do not think that this is a very long lapse of time.

Mr. Arnold Shaw: Does my right hon. Friend agree that this problem is a very


serious one and that a great deal of preparation is required before he can come to a firm decision? I think that the whole House will agree that it is necessary to take every conceivable offer made to my right hon. Friend to solve the problem.

Mr. Silkin: I am grateful to my hon. Friend. In this case, I would rather be accused of inertia than of moving too quickly and getting the wrong answer.

Builders (Departmental Committees)

Mr. Jopling asked: the Minister of Public Building and Works what steps he plans to take to reduce the 23 departmental committees on which builders are currently serving; and whether he will make a statement.

Mr. Loughlin: None, Sir.

Mr. Jopling: If I am right in understanding the answer to be "None", does not the Minister remember that the Construction Materials Group was abolished because its membership overlapped that of the E.D.C.? Does not he think that he could scrap more of these 23 committees and let the builders get on with their job of building?

Mr. Loughlin: The hon. Gentleman should recognise that there are three major national committees here. If one takes Wales and Scotland, there are 13 regional committees. According to the opinions of both sides of the industry, the other committees are important. Does the hon. Gentleman want me to scrap some of the regional committees?
As for the E.D.C. and the National Consultative Council, there is every means by which we ensure that there is no overlapping of any kind.

Protective Clothing

Mr. Rossi: asked the Minister of Public Building and Works what advice has been given to firms in the construction industry by the Economic Development Committee for Civil Engineering on protective clothing; and what action he has taken to give publicity to it.

Mr. Loughlin: The Civil Engineering E.D.C. has issued advice in the form of a booklet entitled "Protective Clothing".

The National Economic Development Office is responsible for publishing and publicising E.D.C. publications.

Mr. Rossi: While we all want to see operatives properly protected, does the hon. Gentleman really think that it is the function of the E.D.C., with all its civil servants, to issue documents to builders telling them that donkey jackets should have seams six inches in front and ten inches behind the shoulder and should be single-breasted with buttons right up to the neck?

An Hon. Member: They sound like uniforms for members of the party opposite.

Mr. Loughlin: The E.D.C.'s advice was based on a report which called for further research into protective clothing. While it may be funny and while we may get a little laugh out of it, there has been a heavy demand from many industries, including the construction industry, for this document.

Mr. Carter-Jones: Will my hon. Friend take it from me that any action to increase and enforce the wearing of protective clothing in any industry where there is a danger will be greatly welcomed on this side of the House?

Mr. Loughlin: I accept fully what my hon. Friend says.

Departmental Structure and Organisation

Mr. Jopling: asked the Minister of Public Building and Works what recent changes he has made in the structure and organisation of his Department; and whether he will make a statement.

Mr. John Silkin: Plans are well advanced for a re-organisation of the headquarters of my Department, which will come into effect on 1st October, 1969. I will circulate more details in
the OFFICIAL REPORT.

Mr. Jopling: May I congratulate the Minister on at last condescending to give the House this important news a month after he told the Press? Can we have an assurance that this change has been brought about with the Minister's proper rôle as sponsor of the construction industry fully in mind?

Mr. Silkin: I hope that the hon. Gentleman and the whole House will acquit me of a deliberate discourtesy. I looked into the precedents, and I found that when the present organisation was set up no statement was made to the House by the noble Lord the late hon. Member for Totnes in introducing the division of administrative and professional responsibilities in 1851.

Following is the information:
My Department is to reshape its top management structure in accordance with the general principles recommended by the Fulton Committee. The aim of the new organization


is to unify administrative, financial, and executive authority at the higher levels in the Ministry.
This will end the present system of separate hierarchies of professional and administrative staff. In its place there will be a unified system in which each block of functions will be under a separate director or manager responsible for all aspectsits work.
Directors or managers will be drawn from the professional and administrative ranks of the Ministry and of the 25 new appointments 13 go to architects, engineers and other professional and scientific staff and the rest to administrators.
The following chart gives the proposed organisation in outline.

Palace of Westminster (Fire Alarm System)

Mr. William Price: asked the Minister of Public Building and Works what recent discussions have taken place with Her Majesty's Inspectors over the fire alarm system in the Palace of Westminster.

Mr. Loughlin: The authorities of the House and members of the Ministry's staff have had frequent discussions over the past year with Her Majesty's Factory Inspectorate on this matter. Plans for a fire alarm system are now being drawn up, and it is expected that installation work will begin next year.

Mr. Price: Is my hon. Friend, therefore, satisfied that at this moment at least the standards of safety in this building are not up to the requirements of other public work houses?

Mr. Loughlin: I am not sure what my hon. Friend means by "public work houses". In view of the fact that there has not been a major fire in this building for 126 years, touch wood, I think we can assume that the building is relatively safe. Of course, there is a fire control system in the House, and I would not like it to be thought that there are no preventive measures.

Mr. Howie: Does my hon. Friend agree that 126 years is rather a long time between major fires? What does he intend doing about it?

Mr. Loughlin: I appreciate that the longer it goes on, the shorter the odds get. However, the whole system is being looked at at present, and we hope to have an entirely new scheme started next year.

Building Materials

Mr. Eadie: asked the Minister of Public Building and Works if he is satisfied there will be no shortage of building materials in the house building industry; and if he will make a statement.

Mr. John Silkin: I do not foresee any general shortages of basic building materials for the house building industry in the next year or two, although local

shortages, and shortages of specialised items, are always liable to occur from time to time, for reasons which cannot be predicted.

Mr. Eadie: Is my right hon. Friend aware that there is genuine concern in Scotland about a possible shortage of bricks, for example, for the house building industry? Is he further aware that according to statements in the Press there seem to be some bodies of people who are more concerned about making party political capital out of this issue than about producing solutions for the problems?

Mr. Silkin: As to the first point, there is a temporary shortage in the central belt in Scotland, but I believe that the deficit is being made good from Northern England and that the present shortage will not be of long duration.
As to the second part of my hon. Friend's question, that seems to be a case of making political bricks without straw.

Mr. Costain: Does the Minister appreciate that the extra burden which the Chancellor of the Exchequer has put on transport costs is one of the reasons for local shortages? Is it not ridiculous that there should be an excess of bricks in England and a shortage in Scotland due purely to the costs of distribution?

Mr. Silkin: I cannot agree with the hon. Gentleman's diagnosis of the brick shortage or of the remedies. The main point is that there has been a change in the employment pattern and, therefore, a change temporarily in the supply of bricks. The obvious thing to do is to meet that supply.

Fly-Ash

Mr. Eadie: asked the Minister of Public Building and Works what percentage of the 40 per cent. of fly-ash used by the construction industry comes from Scotland; and what areas it comes from.

Mr. John Silkin: About 10 per cent. It is produced in Ayrshire, Renfrewshire, Kincardineshire, Fife and Edinburgh.

Mr. Eadie: Is my right hon. Friend aware that the miners believe that not enough publicity is given to what could


be described as derivatives coming from coal-fired stations and that his statement today will certainly be welcomed by them?

Mr. Silkin: I am grateful to my hon. Friend, and I congratulate him on the vigour with which he has pursued this subject.

Sir R. Russell: Can the Minister tell us what fly-ash is?

Mr. Silkin: Fly-ash—P.F.A.—is produced by the electricity generating stations using ground coal blown on to the boilers, which produces a powdered ash.

Public Building Work

Mr. Speed asked: the Minister of Public Building and Works what percentage of building work will be carried out by the public sector in 1969 and 1970.

Mr. John Silkin: Approximately 55 per cent. of new work in 1969 and a little less in 1970.

Mr. Speed: Would it not be a good idea to try to redress the balance a little and at least get a 50–50 basis? Would not a good start be to get the private house building sector back to the 1964 level?

Mr. Silkin: Questions on housing are probably better addressed to my right hon. Friend the Minister of Housing and Local Government. But, since the subject has been raised, the annual number of houses produced under the Conservative Government totalled 305,000 and under the Labour Government 395,000.
The hon. Gentleman is understandably interested in the private sector. He may be interested to know that the average number of houses produced for the private sector by the Conservative Government was 135,000 per annum and by the Labour Government 210,000 per annum.

Mr. Alfred Morris: Has my right hon. Friend noticed the increasing venom with which local Conservative groups have been attacking direct works departments of local authorities? Does he agree that there is a need for more publicity about the excellent achievements of direct works departments, like that in Manchester?

Mr. Silkin: I would always agree with my hon. Friend on practically everything.

Statues (London)

Mr. Dudley Smith: asked the Minister of Public Building and Works if he will set up an independent committee to review the number of statues and memorials now on public view in London, and to make recommendations over the replacement of those which they consider no longer relevant or desirable in 1969.

Mr. Loughlin: My right hon. Friend has no evidence of any widespread feeling which would justify such an inquiry.

Mr. Dudley Smith: Can the Parliamentary Secretary say for how many more generations we shall have to endure some of the unknown and unremembered people whose statues are now on display? Is it not time these statues were replaced by statues of some of the outstanding men and women of the last 100 years? Surely this would be more appreciated by the public.

Mr. Loughlin: I accept that there is a school of thought that there ought to be a re-examination of our attitude to statues. But I do not think there is a wide demand for a review of the kind that the hon. Gentleman indicates. This is a complicated problem. It involves the approval of this House in some instances, it involves legal problems, and it involves an examination of the circumstances in which a statue was put up. It is a difficult problem—[Interruption.] I took it, Mr. Speaker, that the House wanted information.

Mr. Lipton: Will my hon. Friend accept that there is no need for an inquiry? Does he agree that some of these monstrosities ought not to be replaced but should be removed once and for all? A lot of London is cluttered up with this rubbish.

Mr. Loughlin: I think the House should clearly understand that many statues are not the responsibility of the Ministry of Public Buildings and Works but are the responsibility of local authorities in London.

Condensation (New Houses)

Mr. Dalyell: asked the Minister of Public Building and Works what research


he is doing into problems of condensation in new houses.

Mr. Loughlin: None at present. Condensation can be largely avoided in new houses and cured in existing houses by the application of existing knowledge. We are trying hard to inculcate good practice in the design, construction and maintenance of houses.

Mr. Dalyell: Would not work on condensation at the Royal Aircraft Establishment, Farnborough, prove useful?

Mr. Loughlin: Research on condensation has been done at the B.R.S. We think that we know what the problem is and what the solutions are. If we find, in the light of experience, that we need to do further research, I think that we can do it at the B.R.S.

Sir A. V. Harvey: Is it not a fact that British experts have assisted the United States space people in solving the problem of condensation in their space research ships, yet council houses in Macclesfield are full of condensation throughout the year?

Mr. Loughlin: What the hon. Gentleman has said in the first part of his supplementary question may be true. Where a local authority has this problem, if the hon. Member concerned will get in touch with me I will do whatever I can to assist the local authority.

Mr. Frank Allaim: How is it that on the Continent they have been able to build multi-storey flats for 50 years without this trouble? Is my hon. Friend aware that all over the country in new council flats clothes, furniture and food are going green with mould because of this problem? Some of the tenants feel that if the architects and building contractors were forced to live in them they would not design houses and flats like them.

Mr. Loughlin: I would not accept that this problem is peculiar to this country. The Department cannot be held responsible for the actions of everyone in the building industry, but it is trying to help to solve a problem that has arisen. We now have the knowledge. We go to the nth degree to get this knowledge across. I repeat, if any local authority wants assistance we will try to help.

Mr. Costain: Would the hon. Gentleman agree that one problem is that people accept the need to run in a new car but not properly to ventilate a new house?

Mr. Loughlin: It may be that the biggest problem with condensation is that we have attempted to concentrate our design on the basis of maximum comfort and have eliminated a great deal of natural draught.

Mr. Crawshaw: Is my hon. Friend aware that in Liverpool some blocks of fiats built as recently as three years ago have had to be vacated while this problem is eradicated? Some people feel that as contractors make their money from these jobs they ought to put this problem right without the local authorities being involved in extra expenses.

Mr. Loughlin: I cannot get myself involved in a dispute between contractors and local authorities. All that we can do is to help the local authorities where possible.

Departmental Land (Scotland)

Mr. Dalyell: asked the Minister of Public Building and Works whether he will make a survey of lands in the possession of his Department in Scotland, with a view to making a more economic use or sale of potential building land, for which he is responsible, and which is currently underdeveloped.

Mr. Loughlin: The Department holds very little undeveloped or underdeveloped land in Scotland, and what is held is to meet specific Government demands. The extent of such holdings is reviewed periodically and when, as a result of changed circumstances, a site or part of a site is no longer required, it is disposed of.

Mr. Dalyell: Granted the periodic review, is my hon. Friend satisfied that the Department has sufficient incentive to disgorge surplus land?

Mr. Loughlin: It is not a question of having an incentive to disgorge it. If we have surplus land, then, subject to the general policy of land disposal, we try to get rid of it, and we would not impede any industrial or housing development.

Building Industry (Plastic Components)

Mr. Dempsey: asked the Minister of Public Building and Works what consideration he has given to the consequences for traditional crafts in the building industry of the potential use of plastic components; and if he will make a statement.

Mr. John Silkin: Craftsmen in the building industry have shown great readiness to adapt their skills to new materials. The policies formulated by the Construction Industry Training Board, in agreement with both sides of the industry, for training apprentices and existing craftsmen will ensure that they are qualified to work with new plastic components.

Mr. Dempsey: Is my right hon. Friend aware that there is grave apprehension within the industry that the introduction of plastic components, such as doors and window frames, in houses may lead to serious diminution within the joinery trade, if not to its ultimate extinction? Can some consideration be given to the consequences of this policy?

Mr. Silkin: It seems to me that there always is a legitimate fear that men have, but craftsmen are always in demand, and provided that the training arrangements and working agreements continue to be adapted to changes in technology I see no reason to fear the future and no reason to believe that this will lead to redundancies.

"Pop" Concerts (London Parks)

Mr. Whitaker: asked the Minister of Public Building and Works whether he will make a statement about the use of London Parks under his control for the giving of pop concerts.

Mr. John Silkin: Permission was given for a small number of "pop" concerts to be held in Hyde Park last year as an experiment. They proved very popular, and the audiences were well behaved. I agreed therefore to allow the experiment to be repeated this summer. The two concerts held so far attracted vast crowds and passed off with only minor incidents. In view of the great pleasure which these concerts afford, particularly to the younger generation, I have decided to allow another concert to be held next month, the last for this year.

Mr. Whitaker: At the last one, which was probably the largest public meeting in London since the days of the Chartists, was not there less hooliganism and litter than at many a football match? But will my right hon. Friend ensure that in future these events are the exception, rather than the rule, because many people go to the parks for peace and quiet?

Mr. Silkin: With regard to the first question, I pay tribute to the young people who attended this enormous concert. At the end of the concert I was most impressed to learn that they had voluntarily helped with the clearing up of litter, and I think they set a great example to their elders.
However, I agree that one can have too much even of a good thing, and that most people go to the parks for relaxation. Perhaps a little of each is the right answer.

Mr. Blaker: Can the right hon. Gentleman say why permission was refused to the Festival of London Stores to hold a parade in Hyde Park this year? Is he aware that his predecessor confirmed in a recent answer that the festival parade which was held last year was very well conducted?

Mr. Silkin: I believe that my predecessor has replied to that question by saying that it was a commercial operation. The "pop" concert was free.

Builders (Loans)

Mr. Peel: asked the Minister of Public Building and Wcrks what representations he has had from builders about the raising of loans to finance construction work; and what replies he has sent.

Mr. John Silkin: None, Sir.

Mr. Peel: Does the right hon. Gentleman realise that the credit squeeze is a very serious matter for the liquidity of small house builders? What progress has been made since 22nd April, when the right hon. Gentleman's predecessor said that he would see what he could do to improve the lot of the small house builder?

Mr. Silkin: Undoubtedly restrictions on credit cause a considerable amount of difficulties—one is aware of that—but if the hon. Gentleman has any specific cases in mind I shall be willing to look into them.

INVISIBLE EARNINGS (MINISTER'S SPEECH)

Mr. Blaker: asked the Prime Minister whether the public speech by the President of the Board of Trade in Glasgow on 20th June, 1969, about invisible earnings represents the policy of Her Majesty's Government.

Mr. Patrick Jenkin: asked the Prime Minister whether the speech made by the President of the Board of Trade in Glasgow on 20th June about Great Britain's invisible earnings represents Government policy.

The Prime Minister (Mr. Harold Wilson): Yes, Sir.

Mr. Blaker: Is the Prime Minister aware that net invisible earnings on private account regularly show a handsome surplus, which last year amounted to £839 million? Has not the time come for the Government to reconsider the relative contributions of visible and invisible earnings to our balance of payments, and what Government policy towards them ought to be?

The Prime Minister: We have had many criticisms about our treatment of those responsible for invisible earnings, and I am glad to join the hon. Gentleman in the tribute he paid to the very big figures for the last year. While there are fluctuations from quarter to quarter, the figure for the first quarter was at a still higher rate. I suggest that that might indicate to the hon. Gentleman that we have been following the right policies.

Mr. Patrick Jenkin: Is the Prime Minister aware that the tribute paid by the President of the Board of Trade to the contribution made by business and financial services is very welcome? Will he now agree to explain, or perhaps, even better, to withdraw, his own slighting reference to those who use money to make money?

The Prime Minister: At the Guildhall last year I paid tribute to those responsible for our invisible earnings, and I expressed the hope that we should see a continuing increase in our invisible earnings. There is a big difference between those who earn money overseas to strengthen our balance of payments and those who gamble at home without

helping to fertilise or irrigate the investment source of British industry. The hon. Gentleman will be delighted to know that in the first quarter net invisible earnings were greater than in the whole of the last year of the Conservatives.

Mr. Heath: On the general question of the trade returns, there has been some comment today that the export figures are larger than the figures actually given because of the so-called figure of anything up to 2 per cent. which is not allowed for. Can the right hon. Gentleman say what the Government are proposing to do about this rather vague figure? Are they proposing to return to the original system before 1963 in which there was a double currency check, the first before exports were made? Second, does the right hon. Gentleman recognise that for every increase there must be a corresponding decrease in the balancing item?

The Prime Minister: I recognise the last point. It makes no difference to the inflow of money to the reserves, or things of that kind. It does, however, make a difference to the true figure of the balance of trade as opposed to the balance of monetary movements and the balance of payments. There is another Question on the Order Paper about a statement by my right hon. Friend the Chancellor of the Exchequer referring to those items.
The position, as the right hon. Gentleman knows, is that the change was made in 1963 by his Government—I think probably for a good reason, to cut down the paper work by exporters—which has led to persistent and increasing under-recording. We are now trying, by rather more than the sample checks up to now, to see how great is the extent of it, and whether any changes in practice are needed.

Mr. Cant: Returning to invisible earnings, will my right hon. Friend institute a cost-benefit analysis into the growth and consequences of the Euro-dollar market, to which the City of London contributed too much, some people think at such high cost?

The Prime Minister: With regard to the Euro-dollar market, I remember at Guildhall paying tribute to what the City has done, despite foreign exchange restrictions, in moving quickly into what is an entirely new market in this country, and indeed as it has done since


then with certificates of deposit. It has been to the benefit of this country in terms of invisible earnings, but the recent problems of the Euro-dollar, resulting from high interest rates in America, and the outflow from Euro-dollars, I do not think can be laid at the door of our own operators in this market.

SHAHANSHAH OF IRAN (DISCUSSIONS)

Mr. Ogden: asked the Prime Minister what further discussions the Government intends to have with the ShahanShah of Iran.

Mr. Roebuck asked: the Prime Minister what further consideration he has given to the possibility of arranging a meeting with the Shahan Shah of Iran.

The Prime Minister: I have nothing to add to the reply which I gave to my hon. Friends on 20th May.—[Vol. 784, c. 236–9.]

Mr. Ogden: Is my right hon. Friend not aware that the British public are only now beginning to appreciate that, under this Government, for the first time in 150 years, British troops are no longer fighting and dying in foreign wars? As the Opposition are still insisting that British troops should return to the Middle East, is it not time that there was a joint statement from the Iranian and British Governments, showing the very wide measure of agreement that there is on policy between them?

The Prime Minister: In one sense, that supplementary question would have been relevant to the first Question on the Order Paper as well as to this one, because this is, of course, highly relevant to the net invisible earnings, which are struck after allowing for overseas Government expenditure, which this Government, of course, are reducing and which they have been criticised by right hon. Gentlemen opposite for reducing. As for a joint statement on this matter, my hon. Friend will recall the recent visit of my right hon. Friend the Foreign Secretary to Teheran, and his statement afterwards, in which it was made clear on behalf of the Iranian Government that they supported the British decision to withdraw.

Mr. Roebuck: Is my right hon. Friend aware that, since I first raised this matter

in the columns of the Sunday Times, the Leader of the Opposition, assisted by no less a dignitary than his Parliamentary Private Secretary, has been trying to create a smokescreen over what happened when they visited Teheran? Would my right hon. Friend not agree that the mischievous activities of the Leader of the Opposition, then and when he came back, have created a dangerous situation in the Gulf? Is it not right that he should take every opportunity to affirm the accord which exists between Her Majesty's Government and the Government of Iran?

The Prime Minister: The accord on this matter was stated by my right hon. Friend. I do not believe that the statements of the Leader of the Opposition have created a dangerous situation in the Gulf, because the Persian Government have made it clear that they support the policies adopted by Her Majesty's Government. It is a fact, however, that the right hon. Gentleman has been criticised for totally misrepresenting what he was told in Iran.

Mr. Biggs-Davison: On what precise date did it come about that our frontier was no longer on the Himalayas?

Mr. Heath: Is the Prime Minister aware that, since the mischief-making attempts of his Foreign Secretary, there has been an exchange of correspondence between the Iranian Foreign Secretary and myself, which has been published and which makes it absolutely plain that there was no misunderstanding whatever? Is it not important that we have had very good relations with Iran during the past 15 years, in which we have had forces in the Gulf, and that there is no reason why this good relationship should ever be broken?

The Prime Minister: The only thing, of course, which has affected this is the equivocation of the right hon. Gentleman's statement on this question. In fact, the Iranian Foreign Minister, in reply to the right hon. Gentleman, described their policy as, among other things,
…non-interference by the countries outside the riparian States and Emirates in the affairs of the Persian Gulf".
The right hon. Gentleman told the House in June:
… as I have made absolutely no statement as to what was said by … the Shah,…it


was impossible for me to have incorrectly reported him."—[OFFICIAL REPORT, 12th June, 1969; Vol. 734, c. 1671.]
He said, and was reported as saying, after the wide circle of talks in Teheran and elsewhere:
I have no doubt about what their view is ', said Mr. Heath, ' and I do not know how the idea has got about that Persia does not want us to stay.' "—
[HON. MEMBERS: "Get on with it."] The right hon. Gentleman is denying that there is any confusion in this matter. Having said after his talks with the Shah that he did not know where the idea had got about that Persia does not wish us to stay—[An HON. MEMBER: "Get on to the next Question."] Of course the hon. Gentleman would like us to get on to the next Question. The Parliamentary Private Secretary to the Leader of the Opposition, in a letter presumably approved by the right hon. Gentleman, said:
 Mr. Heath had held long talks with the Shah and in this article Mr. Heath drew his own conclusions from those private talks.

Mr. Heath: Perhaps the Prime Minister would be kind enough to quote what I said. I said:
 I am satisfied that a Conservative Government would be able to work well with these countries "—
that is, both Iran and Saudi Arabia—
' since we all share one common aim: the maintenance of stability.
As for the Prime Minister's quotation from the Iranian Foreign Secretary's letter, is he suggesting that his own Government, with forces in the Gulf, is at this moment interfering with other countries in the Gulf? Of course not, and neither would we.

The Prime Minister: No, Sir, I am saying that the Shah approves our decision to withdraw, whereas the right hon. Gentleman was reported in The Times as saying that he did not accept the view that the Shah of Iran would resent a reappraisal of the British decision to pull out by 1971. He then said that there was no doubt about their view and went on to say, after his talk with the Shah,
I do not know where the idea has got about that Persia does not wish us to stay.
This is totally false to what the Shah himself said, and it is, of course—

Mr. Goodhew: On a point of order. Can the House be protected from these very long and protracted quotations,

since Question Time is for asking questions?

Mr. Speaker: The Chair allows the two Front Bench leaders some latitude, and, indeed, some longitude.

The Prime Minister: To finish the Answer, I said that it was, therefore, no surprise that the—[Interruption.] Well, we had these statements in June by the right hon. Gentleman which are not correct. The Shah said—this was reported by the Foreign Secretary—
 The Shah feels that Mr. Heath must have misunderstood or misquoted what he said.
I leave it to the House to judge.

MINISTERS AND MEMBERS (REMUNERATION)

Sir G. Nabarro: asked the Prime Minister (1) whether, in view of the recommended increases of certain civil servants' salaries to £14,000 per annum, which will alter the relationship with Ministerial salaries, he will refer the salaries of Ministers and Members to the National Board for Prices and Incomes with instructions to report by 1st October, 1969;
(2) whether, in view of the recommended increase of certain civil servants' salaries to £14,000 per annum, he will refer to the National Board for Prices and Incomes his own taxable and non-taxable salary and emoluments, with an instruction to the Board to report by 1st October, 1969.

The Prime Minister: There are no plans to increase Ministerial salaries. On the remuneration of Members, I have nothing to add to what I said in reply to a Question by my hon. Friend the Member for Bristol, North West (Mr. Ellis) on 3rd April.—[Vol. 781, c. 649–50.]

Sir G. Nabarro: Would the right hon. Gentleman reconsider that reply, having regard to the fact that, recently, a statement has been made to the effect that the salaries of the senior echelon of civil servants were to be raised progressively from £9,000 per annum to £14,000 after those of the senior echelon of the heads of nationalised industries have been raised from £12,500 to £20,000 and, in one case, to £25,000? Does he think that Members of the House of Commons should be the only public servants to be disregarded in


the context of highly increased costs of operation?

The Prime Minister: I know the feeling in all parts of the House on this question and particularly, of course, about the problem which hon. Members have in meeting the costs of doing the job, quite apart from the question of salaries. But the supplementary answer to which I referred in my original reply was, of course, in reference to the remit which the Services Committee now has on hand to consider these very questions. My right hon. Friend the Leader of the House told the House in reply to Questions earlier—I think that I have it right—that he was hoping to be able to present the report of the Services Committee to the House before the Recess. I suggest we wait for that report before making further progress.

Mr. C. Pannell: Would my right hon. Friend bear in mind that the effects of this reference to the Plowden Committee and the Committee's findings go far beyond the Government and that they impinge even upon the authority of Mr. Speaker and this House, in so far as we had the ridiculous position in 1965 that Mr. Speaker received remuneration below that of the Second Clerk Assistant and that we are likely to reach that ridiculous situation again? Is he aware that the pay of the Officers of the House is reflected in these rises, because they follow Civil Service rates? Would he do something to stop this particular nonsense?

The Prime Minister: I am aware of these difficulties; indeed, they are difficulties which were commented upon in a different context by the Lawrence Committee in 1964, when it referred to the disparity between Ministers' salaries and the salaries of their Permanent Secretarys. At that time, there was the problem of Mr. Speaker and his salary in relation to those of the paid Officers of the House. All these questions are very much in the minds of all of us, but it would be right for the House to await the report of the Services Committee before the Recess.

Sir C. Osborne: Does the right hon. Gentleman agree that whatever the merits may be behind a demand for increased salaries, from whichever quarter it may come, he must bear in mind the impor-

tance of checking inflation since it affects the poorest of the poor? Before giving way to demands, will he bear this in mind?

The Prime Minister: That is a central consideration, and has been throughout in the proposals which my right hon. Friend the Chancellor of the Exchequer has put and is putting again to the House this week in the matter of Budget finance and monetary policy.
The hon. Gentleman is right, of course, to refer to inflation in this context. However, there are problems about hon. Members being able to do their job, and these are being examined. There is the question—the hon. Gentleman referred to those living in poverty—of the poor, and there has recently been announced a further increase in retirement pensions and other social security benefits. [An HON. MEMBER: "Not enough."] Some of my hon. Friends feel that these increases have not been big enough. We would all like them to be greater, but there is the problem of paying for them, a subject which, again, the House has discussed.
The answer to the other point he raised is that I think that we should leave the matter to the Services Committee.

Mr. Shinwell: Would my right hon. Friend agree that the question of increased Ministerial and hon. Members' salaries can be dealt with at a date some time in the future? Is not the central issue this: since time and again under the prices and incomes policy the question of workers' wages has been under review in this House, why was it necessary to come to this decision without consulting hon. Members? Why should the Government be so trigger-happy in making vast sums of remuneration available to civil servants in view of the strong feeling in the Labour Party on this matter?

The Prime Minister: I take it that when my right hon. Friend referred to "this decision" he was referring to the Report of the Plowden Committee and the announcement of last Friday. He will be aware that it was indicated on Friday that it would be our intention in the future progressively to ensure that more and more of the special reporting bodies on the incomes of particular groups—professional groups and others—will be brought under the aegis of the Prices and Incomes Board.

Sir A. V. Harvey: Is the right hon. Gentleman aware that a problem which is even more urgent than that of increasing hon. Members' salaries is the one affecting hon. Members' widows? Is he aware that in the last year there have been at least two cases of ladies in this category being expected to live on a pittance compared with the provision made by the French legislature and Parliaments in other parts of the world? Is not this an absolute disgrace?

The Prime Minister: I am grateful to the hon. Gentleman for making that point, because hon. Members in all parts of the House have recent reason to know of this problem in individual cases concerning well-respected hon. Members of Parliament. I suggest that this matter is best left to the authorities concerned with it, although there is, I am sure, general support in the House for what the hon. Gentleman said.

Mr. Heffer: Is my right hon. Friend aware that it is not a question of increasing hon. Members' salaries but a question of providing assistance to enable hon. Members to do their job; for example, assistance with secretarial work, postage, out-of-town expenses, and so on? Is he aware that many hon. Members who, like myself, have been shop stewards are wondering what we have been doing in this place for the last few years? [HON. MEMBERS: "Hear, hear.] In other words, is he aware that in any circumstances I would have called a mass meeting long ago to get something done about the present state of affairs?

The Prime Minister: I am sure that any mass meeting that my hon. Friend might have called on this subject in this building would have been better packed than any other, since these matters are always fully discussed among hon. Members. I assure my hon. Friend that I am aware of the point he made; namely, that he is concerned not so much with the question of salaries but with the question of the ability of hon. Members to do their job and the need to meet the costs involved in doing that job.
This matter was referred to the Services Committee and that is why I once again urge the House to await the report of the Services Committee which, it has been indicated to us—I do not suppose that this can be regarded as a promise

—will be available before the Recess. Once the report is received the House can consider it.

Dame Irene Ward: Would the right hon. Gentleman bear in mind that I do not regard hon. Members as public servants and that I do not agree with my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) on this issue? [HON. MEMBERS: "Oh."] He does not represent me. Will the right hon. Gentleman remember that I am more interested in those living on small fixed incomes? Will he also take note that I do not want the Services Committee interfering in this kind of matter; that I do not care tuppence for the Services Committee over this. I want something for those living on small fixed incomes rather than for the rest of the community.

The Prime Minister: The hon. Lady is, of course, entitled to her view. Her remarks will have been noted by the House, although I am not, of course, concerned with any disagreement that there may be between her and her hon. Friend the Member for Worcestershire, South (Sir G. Nabarro).

Dame Irene Ward: But I am.

The Prime Minister: That is obvious, but such rifts in the lute are of more concern to the hon. Lady than they are to me. I am concerned, as is the hon. Gentleman who raised the matter initially and as are hon. Members in all parts of the House, about the specific question of the cost of the services which are necessary for an hon. Member to do his job properly.
The question of people living on fixed incomes, pensions and so on is, of course, important; and I am sure that the hon. Lady will be delighted to be sitting in a Parliament which has raised old-age pensions nearly as much in five years as her Conservative Administration did in 13 years.

Mr. Winnick: While there is a strong case for hon. Members who represent provincial constituencies to have better lodging allowances, free telephone calls and so on, may I ask my right hon. Friend to accept that some of us consider that it would be wrong to raise hon. Members' salaries now or in the near future? Would not my right hon. Friend


agree that, as Labour Members, we should bear in mind that there are millions of low-wage earners whose financial needs are far greater than ours?

The Prime Minister: I am well aware of the views of my hon. Friend and those of many other hon. Members. Many hon. Members consider that the right way to attack this problem, whatever the anomalies may be, is by improving the means to do the job rather than increasing the basic rate of pay. In any consideration of this matter it is clear that the House—we have always wished to take this line in the past—must take into account public opinion outside. It might be the right and fair judgment of public opinion that it is more concerned that hon. Members should be more able to do their job, both in relation to their constituencies and in the House, than it is with hon. Members' salaries. That raises an issue which the Services Committee is considering.

Several Hon. Members: rose—

Mr. Speaker: Order. We are well past Question Time.

FINANCE BILL (AMENDMENTS)

Mr. Peyton: On a point of order. May I raise a point with you and, at the same time, seek your guidance on an important matter relating to our proceedings on the Finance Bill, Mr. Speaker?
It may be within your knowledge that it was not until 2.50 p.m. today that copies of the Notice Paper making known the selection of Amendments and new Clauses to be discussed on the Finance Bill were available to hon. Members. It is not my intention to in any way reflect either on yourself or on the Clerks who, I know, would seek to do their best on all occasions, no matter how difficult the

circumstances, to oblige the House and make our proceedings as easy as possible.
However, today, perhaps as a result of the congested state of business—and for this the Government must take their share of blame—hon. Members who wish to take part in our debates of the Finance Bill have been placed in a genuine difficulty because of being given only 45 minutes' notice of what was to be discussed.

Mr. Speaker: I am not unsympathetic to the point that the hon. Gentleman the Member for Yeovil (Mr. Peyton) has raised. Perhaps he will not be unsympathetic towards Mr. Speaker, who spent quite a time with his advisers making the selection as far as those tabled up to yesterday morning, and who, because of circumstances over which he had no control, had to deal with 29 starred Amendments put down today.
At some time during this rather hectic morning's activities we managed to get out a duplicated list, something which was not always available in the House, and we did this as early as we could. I hope that the inconvenience will not be as great as the hon. Gentleman fears.

Mr. Iain Macleod: Further to that point of order, and on a purely practical point, I am sure that the House appreciates the extreme burden on the Chair in selecting Amendments for Report. We are extremely grateful to you, Mr. Speaker, but you will realise that the list of Amendments which have been selected was put out rather late this afternoon. Therefore, I ask that if you receive requests which there has not yet been time to put to you for separate Divisions, you will consider this and in due time announce your decision?

Mr. Speaker: I will consider them in the non-committal way in which Mr. Speaker always considers requests for Divisions.

Abortion (Amendment)

3.40 p.m.

Mr. Norman St. John Stevas: I beg to move,
That leave be given to bring in a Bill to improve the law governing abortion and the status and rights of the medical profession in relation thereto.
The Long Title of the Bill is:
A Bill to improve the law governing abortion and the status and rights of the medical profession in relation thereto.
Abortion is a controversial and emotional topic and the House needs to discuss it rationally. Emotive or sensational utterances, whatever their source, do not help us. There are widely differing views in the House on the question of abortion. I do not question the good intentions or the sincerity of anyone, least of all the sponsor of the Abortion Act. I ask, in return, that no one should question mine.
It is true that I have strong views on the morality of abortion which derive in part, but only in part, from my religion. I realise, more fully than anyone else, that a Catholic celibate is not the ideal person to be introducing a Bill of this kind. It would be better if I were an agnostic mother of nine, but one has to discharge the duty which falls upon one.
It would be a slander upon the moral sense of the British people if it were thought that only Roman Catholics are concerned about the working of the Abortion Act. I place a very high value upon human life. That is why I am opposed not only to abortion, but also to capital punishment. I believe that all life is worthy of reverence, especially if it is in a defenceless form. I am entitled to give witness to that belief inside and outside this House. What I am not entitled to do is to impose my moral views on this question on other people. Indeed, it would be wrong to attempt to do so.
The law as far as it concerns moral matters should rest on the moral consensus of the community. As I take it on this matter, while the community as a whole does not want a total ban upon abortion neither does it want abortion on demand. What it wants is that abortion should be available where there are serious and genuine needs and that it

should be carried out under the best possible medical conditions. That I believe to have been the will of Parliament when it passed the Abortion Act. I do not believe that the Act is achieving those ends. That is the actual situation we have to face today.
"There is no doubt that the way the Act is working, in particular, in the private sector, is giving grave alarm even to those who were keen supporters of it". Those are not my words, but the words of the Secretary of State for Social Services. My concern is not with the National Health Service, but with the private sector. We have all read stories about foreign women coming to Britain for abortions. This is disturbing, but what is important to Britain is the impact which the Act is having on the British people and on the medical profession here.
What is clear, also, is that a minority of doctors are making huge fortunes out of the Act and are not observing the normal standards of medical care. I will give the House one figure which was quoted by Sir John Peel, President of the Royal College of Gynaecologists, which indicates the way the Act is working. During a three-month period, 52 women were treated under the National Health Service and discharged from hospital in 24 hours. During the same period the number of women discharged after 24 hours in the private sector was over 5,000. Sir John Peel characterised that as amounting almost to medical negligence. Under the cover provided by the Section in the Act concerning good faith, rackets are being operated which neither the law nor the profession is able to check.
My right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg), shadow Home Secretary, warned the House of this danger during debates on the final stages of the Bill. I believe that he has been proved right. Anyone with the slightest concern for public morality must be concerned about these abuses under the Act. Having held detailed consultations with representatives of the medical profession, I put forward this proposal, which has the support of the Royal College of Gynaecologists, the B.M.A. and the Medical Defence Union. It is the only proposal in my Bill, which


is limited to it because I believe it to be vital.
I propose that of two doctors who certify abortion under the law to be legal one should be a consultant gynaecologist holding office under the National Health Service and that the operation should be carried out under his supervision. As there is a limited number of gynaecologists in Britain, and I do not wish to see the Act nullified in certain parts of the country, I further suggest that other doctors of equivalent status be approved by the Minister from panels submitted by professional medical bodies. This simple step would bring to an end the vast majority of racketeering which is going on. The weakness of the Act is that there is no effective check in it. Its sponsor hoped that the place where the abortions have to be carried out having to be approved by the Minister would act as a check, but the Minister has taken the view that, provided certain facilities are available, he has no power in the matter.
The reporting of abortions has not proved to be a check. What we need is a responsible medical person, highly qualified and highly placed, who will effectively check that the provisions of the Act are being followed. It may be objected that this would provide a unique limitation on medical practice. I say two things in answer to that. First, abortion is a unique operation because it involves the lives of two people, not one. It is not the same as having a tooth out, or having a finger or limb amputated. It is in a category of its own. Secondly, the official bodies of the profession approve this course.
It may be objected that the Minister would not want to take an invidious decision, but the sifting out process would be done by the profession and the final decision only would be the Minister's. I am not wedded dogmatically to this particular proposal. If, during later stages of the Bill, should it get to Committee, an Amendment were moved to meet such objections, I would be most willing to consider it.
One cannot dispose of a complicated subject like this in a 10-minute speech. The House knows as well as I do the purpose of the Ten Minute Rule Bill procedure. The House has here an opportunity to register by its vote the

opinion that it shares the anxieties of the majority of people in the country, of the Press and a large number of members of the medical profession, and encourage the Government to take action.
Whatever its decision, it is right that the House of Commons, which is the forum of the nation, should register its vote and its voice on this subject. A social policy which makes abortion easy and family planning difficult cannot be a good policy. It is national scandal that out of more than 200 local health authorities only 34 provide a full family planning service.
I believe that by giving me leave to introduce my Bill today the House would give an impetus towards the introduction of more intelligent and rational policies in these matters and that it would be striking a reasonable balance between the needs of the individual mother, for whom we should certainly have concern and compassion, and the demands of the social, moral and medical strength and reputation of the country, with which we should also be equally concerned.

3.50 p.m.

Mr. David Steel: I do not ask the House to refuse the hon. Member for Chelmsford (Mr. St. John-Stevas) leave to bring in his Bill on the grounds that I regard the Abortion Act as totally perfect or immutable for the future, nor do I do it on the grounds that I am totally satisfied or complacent about the manner in which it is working today. I do it, rather, because I see in the proposed Bill something which would not solve the problems that we are facing in the working of the Act, but which would be a thoroughly regressive Measure.
It is worth reviewing the facts at the end of the first year of operation of the Act. About 40,000 legal abortions were carried out. This is a substantial increase on the previous number, but an increase was to be expected if the Act was to be effective. If there had been no increase, clearly the Act would not be achieving its objective.
The limited evidence we are able to gather—for example, from the London Emergency Bed Centre figures—shows that we are achieving the objective of reducing criminal abortions. The figures given by that centre show that in the first quarter of 1966 there were 1,363


emergency admissions for spontaneous or incomplete abortions, whereas during the first quarter of this year the figure was down to 870. This is a very satisfactory development.
Moreover, it is not true that we have established in Britain a high rate of legal abortion. Britain has approximately five abortions per 100 live births, whereas in Norway, Sweden, Denmark and Finland, all of which have abortion laws roughly comparable with our own, the figures are higher, ranging from 6 to 8 per 100 live births. Our figure of 5 per 100 is nowhere near the figure achieved in countries with abortion on demand legislation, such as Czechoslovakia with 43 abortions per 100 live births and Japan with 38. Taking these figures in their context, it is nonsense to claim that London is the abortion capital of the world.
The present problem which the operation of the Act has faced is one which was not mentioned by the hon. Gentleman. It is the regional difference within Britain of the practice of abortion under the National Health Service. This was something which was foreseen by the sponsors, and I myself referred to it during the passage of the Bill. I believe that it will take many years before we even out the practice and end the present situation, in which it is twice as easy to get an abortion in Newcastle as it is in Birmingham. This is the type of question which should be the subject of concern in the House rather than the matters referred to by the hon. Gentleman, because I believe that it is the restrictive practices in centres like Birmingham which in themselves stimulate the growth of the private centre of abortion in London.
That growth of the private sector has very little to do with foreigners. The amount of hysteria in the Press in recent weeks about, for example, 30,000 Danish women coming in charter flights to Britain has been shown to be complete nonsense. The Secretary of State for Social Services, having made his inquiries, discovered that, in the period of this hysteria during June and the first week of July, only four Danish women had abortions in the private clinics in London.
Typical of the stories was one in one newspaper, where a taxi driver who was

interviewed was recorded as saying that he had, in fact, been bringing foreign girls on an average of one a week to clinics in London; the enterprising journalist multiplied this figure by the number of taxis available at any given time at Heathrow Airport and came to the conclusion that 1,000 foreign girls were invading Britain each week for abortions. These figures are shown to be false by the number of notifications received, unless it is suggested that cases are not being notified, in which case a criminal offence is taking place under the Act and action can be taken.
Having said that, however, I believe—there I share the concern felt by the hon. Member for Chelmsford—that one or two doctors in one or two clinics are not giving the fullest medical attention to their patients and are primarily motivated by financial considerations. I share that concern with the hon. Gentleman, but I say to him that we gave the Secretary of State full power in the Act to introduce new Ministerial regulations. The Act empowers the Secretary of State under the regulations, to demand
such other information relating to the termination as may be so prescribed".
Therefore, there is still legislative power in the Secretary of State's hands which he has not yet used and which he could use if he were satisfied that the situation demanded it.
Moreover, I believe that the profession itself has a responsibility. The General Medical Council, in its rules of discipline, has as one of its definitions of infamous conduct the
abuse of financial opportunities offered by medical practice.
I should have thought that it should be the General Medical Council which should take action in cases where abuse is occurring.
I respect, and always have done, the sincerity of the hon. Member for Chelmsford, but he must forgive me if I find it difficult to accept that he has come forward today in the spirit of the man wielding the oilcan just to ensure that the machinery works a little better. The fact is that he has come armed with a spanner to throw into the works, whether it is his intention or not.
I invite the House to consider four points in rejecting the hon. Gentleman's


application to bring in a Bill. First, to limit one of the two doctors to a consultant would not check the operation of the private sector. Some part-time consultants in the National Health Service are already operating in the private sector and it would be only a matter of time before one or two consultants had lined up a particular monopoly in this area.
Secondly, and much more seriously, I believe that it would cause delays in patients getting abortions. Whatever one's view about abortion is, both medically and ethically—I have said this before—I believe that if it has to happen it is desirable that it should happen at the earliest possible time. The experience of Sweden has shown that where there is too much red tape and where, as in this country, there are only 600 consultant gynaecologists, it would be disastrous from the point of view of mortality figures and in the effect of driving women again to illegal operations if there were long delays in women obtaining appointments for a legal abortion.
Thirdly, what the country requires is more doctors under the National Health Service willing to operate the Act properly and in a balanced way, not fewer doctors. This proposed Amendment would merely create more Birminghams, instead of more Newcastles. The Amendment which the hon. Gentleman proposes was discussed twice in the House and twice in the other place in one form or another during the passage of the Bill, and I see no reason why w(.; should not stand by our original decision in rejecting this restrictive proposal.
Finally, I welcome what the hon. Gentleman said at the beginning of his speech about emotional language, but I cannot end without referring to what I think was the quite disgraceful speech made last night by the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight). It is, I think, a monstrous slur on the medical profession in Britain to suggest that live babies are being burned in incinerators.

Mrs. Jill Knight: rose—

Hon. Members: Sit down.

Mr. Speaker: Order. If the hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) does not give way, the hon. Lady must sit down.

Mr. Steel: If it is—

Hon. Members: Give way.

Mr. Steel: If it is—

Mrs. Knight: rose—

Mr. Steel: If—

Hon. Members: Give way.

Mr. Speaker: Order. If the hon. Gentleman does not give way after referring to the hon. Lady, it is his business.

Mr. Steel: If the hon. Lady—

Hon. Members: Give way.

Mrs. Knight: On a point of order.

Mr. Speaker: Order. It is the practice that speeches under the Ten Minute Rule are not interrupted by either debating points or points of order, but I think that there is substance in this one.

Mrs. Knight: On a point of Order, Mr. Speaker. Is it not usual that, when an hon. Member has made a direct slighting reference to another hon. Member, the Member referred to has a right to make reply?

Mr. Speaker: Order. The question of right does not come into it. It is still for the hon. Gentleman.

Mr. Steel: Further to that point of order, Mr. Speaker. Am I permitted under the rule to give way? If so, I shall gladly give way. I understood that it was not in order.

Mr. Speaker: I would not prevent the hon. Gentleman from giving way. It is most unusual under the Ten Minute Rule, but the hon. Gentleman has referred critically to another hon Member.

Mrs. Knight: The hon. Member has made a direct reference to a speech which I made last night in which I spoke nothing but the truth. If he does not happily join with me in being appalled at the incident at Stobhill Hospital, Glasgow, where a live baby was put into a boiler, I am very surprised that I do not have his agreement in saying that it is a montrous procedure.

Mr. Steel: I was about to refer to the tragic and deplorable incident at Stobhill, but I must clarify the facts of the case. A baby was not put into any boiler.


What happened was that a mistake was made, by, incidentally, a consultant gynaecologist, and a viable foetus was aborted. It was later found that this foetus was alive, it was brought back, and attempts were made to resuscitate it. The child, unfortunately, died.
But from this deplorable incident, the papers in which are still being examined by the Secretary of State for Scotland, to conclude that 108 babies—the wrong figure in any case—may possibly have been burned alive is to make a montrous suggestion.

Hon. Members: Disgraceful.

Mr. Speaker: Order. The incident is over. We are back to the practice under the Ten Minute Rule, and we are nearly at the end of the time.

Mr. Steel: I have seen references in the Press and elsewhere to a "pro-abortion lobby". I wish it to be understood that there is no such thing. I hope that we in this House are all anti-abortion, for share the view of the hon. Member for

Chelmsford that we ought to be much more concerned about the implementation of family planning legislation than about amendments to the Act of this kind. I hope that the House will keep the Abortion Act and its operation firmly under review by the normal processes of questioning Ministers responsible for its operation.

Finally, I invite the House to consider a short quotation from the editorial in the Lancet, which considered the first year of operation of the Act:
Things were certainly easier for the gynaecologists before the public and Parliament made their wishes known in the Act—but they were much harder for women".

I invite the House to reject the Motion for leave to bring in a Bill which would reverse that process.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business):—

The House divided: Ayes 199, Noes 210.

Division No. 327.]
AYES
[4.3 p.m.


Abse, Leo
Dodds-Parker, Douglas
Holland, Philip


Alison, Michael (Barkston Ash)
Doughty, Charles
Howarth, Robert (Bolton, E.)


Allason, James (Hemel Hempstead)
du Cann, Rt. Hn. Edward
Howell, David (Guildford)


Alldritt, Walter
Dunn, James A.
Hunter, Adam


Atkins, Humphrey (M't'n &amp; M'd'n)
Edelman, Maurice
Hutchison, Michael Clark


Baker, W. H. K. (Banff)
Elliot, Capt. Walter (Carshalton)
Irvine, Bryant Godman (Rye)


Batsford, Brian
Elliott,R.W.(N'c'tle-upon-Tyne,N.)
Jenkin, Patrick (Woodford)


Beamish, Col. Sir Tufton
English, Michael
Jennings, J. C. (Burton)


Bence, Cyril
Errington, Sir Eric
Jones, Arthur (Northants, S.)


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Ewing, Mrs. Winifred
Jones, Dan (Burnley)


Berry, Hn. Anthony
Farr, John
Jones, J. Idwal (Wrexham)


Biffen, John
Foley, Maurice
Kelley, Richard


Biggs-Davison, John
Fortescue, Tim
Kerby, Capt. Henry


Bishop, E. S.
Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Black, Sir Cyril
Galbraith, Hn. T. G.
Kershaw, Anthony


Blackburn, F.
Galpern, Sir Myer
Kimball, Marcus


Bossom, Sir Clive
Gibson-Watt, David
King, Evelyn (Dorset, S.)


Boyd-Carpenter, Rt. Hn. John
Gilmour, Sir John (Fife, E.)
Kirk, Peter


Braine, Bernard
Glover, Sir Douglas
Kitson, Timothy


Brinton, Sir Tatton
Glyn, Sir Richard
Knight, Mrs. Jill


Brown, Sir Edward (Bath)
Godber, Rt. Hn. J. B.
Lancaster, Col. C. G.


Buchanan, Richard (G'gow, Sp'burn)
Goodhew, Victor
Lewis, Kenneth (Rutland)


Bullus, Sir Eric
Gower, Raymond
Longden, Gilbert


Campbell, B. (Oldham, W.)
Grant, Anthony
Mabon, Dr. J. Dickson


Campbell, Gordon (Moray &amp; Nairn)
Grieve, Percy
McAdden, Sir Stephen


Chichester-Clark, R.
Griffiths, Eddie (Brightside)
McBride, Neil


Clark, Henry
Griffiths, Eldon (Bury St. Edmunds)
Macdonald, A. H.


Cooper-Key, Sir Neill
Gurden, Harold
McGuire, Michael


Cordle, John
Hall, John (Wycombe)
Mackenzie, Alasdair(Ross&amp;Crom'ty)


Corfield, F. V.
Hamilton, James (Bothwell)
Maclean, Sir Fitzroy


Costain, A. P.
Hamilton, Michael (Salisbury)
Maclennan, Robert


Craddock, Sir Beresford (Spelthorne)
Harris, Frederic (Croydon, N.W.)
McMaster, Stanley


Cunningham, Sir Knox
Harris, Reader (Heston)
MacMillan, Malcolm (Western Isles)


Currie, G. B. H.
Harrison, Brian (Maldon)
Macmillan, Maurice (Farnham)


Dalkeith, Earl of
Harvey, Sir Arthur Vere
McMillan, Tom (Glasgow, C.)


Dance, James
Harvie Andersen, Miss
McNair-Wilson, Michael


d'Avigdor-Goldsmid, Sir Henry
Hattersley, Roy
McNamara, J. Kevin


Deedes, Rt. Hn. W. F. (Ashford)
Hawkins, Paul
Maddan, Martin


Delargy, Hugh
Hiley, Joseph
Maginnis, John E.


Dempsey, James
Hirst, Geoffrey
Mahon, Peter (Preston, S.)




Mahon, Simon (Bootle)




Marten, Neil
Price, David (Eastleigh)
Tilney, John


Maude, Angus
Price, Thomas (Westhoughton)
Tinn, James


Mawby, Ray
Pym, Francis
Turton, Rt. Hn. R. H.


Mills, Peter (Torrington)
Ramsden, Rt. Hn, James
van Straubenzee, W, R.


Mills, Stratton (Belfast, N.)
Rawlinson, Rt. Hn. Sir Peter
Waddington, David


Monro, Hector
Rees-Davies, W. R.
Ward, Dame Irene


Montgomery, Fergus
Renton, Rt. Hn. Sir David
Watkins, Tudor (Brecon &amp; Radnor)


More, Jasper
Rhys Williams, Sir Brandon
Weatherill, Bernard


Morgan-Giles, Roar-Adm.
Ridsdale, Julian
Wells, John (Maidstone)


Morris, Alfred (Wythanshawe)
Rippon, Rt. Hn. Geoffrey
Wells, William (Walsall, N.)


Morrison, Charles (Devizes)
Rodgers, Sir John (Sevenoaks)
Whitelaw, Rt. Hn. William


Mott-Radclyffe, Sir Charles
Rossi, Hugh (Hornsey)
Wiggin, A. W.


Murton, Oscar
Russell, Sir Ronald
Wilkins, W. A.


Oakes, Gordon
St. John-Stevas, Norman
Williams, Donald (Dudley)


O'Malley, Brian
Sandys, Rt. Hn. D.
Williams, Mrs. Shirley (Hitchin)


Onslow, Cranley
Scott-Hopkins, James
Willis, Rt. Hn. George


Orr, Capt. L. P. S.
Silvester, Frederick
Wilson, Geoffrey (Truro)


Osborne, Sir Cyril (Louth)
Small, William
Wolrige-Gordon, Patrick


Oswald, Thomas
Smith, Dudley (W'wick&amp;L'mington)
Wood, Rt. Hn. Richard


Page, Graham (Crosby)
Speed, Keith
Woodnutt, Mark



Stainton, Keith
Woof, Robert


Page, John (Harrow, W.)
Stodart, Anthony
Wylie, N. R.


Pearson, Sir Frank (Clitheroe)
Stoddart-Scott, Col. Sir M.
Younger, Hn. George


Peel, John
Summeirskill, Hn. Dr. Shirley



Peyton, John
Symonds, J. B.
TELLERS FOR THE AYES:


Pink, R. Bonner
Taylor, Sir Charles (Eastbourne)
Sir Gerald Nabarro and Mr. Robert Cooke.


Pounder, Rafton
Taylor, Edward M.(G'gow, Cathcart)



Powell, Rt. Hn. J. Enoch
Temple, John M.





NOES


Albu, Austen
Dobson, Ray
Houghton, Rt. Hn. Douglas


Allaun, Frank (Salford, E.)
Doig, Peter
Howarth, Harry (Wellingborough)


Allen, Scholefieid
Driberg, Tom
Howie, W.


Armstrong, Ernest
Dunnett, Jack
Hoy, Rt. Hn. James


Ashley, Jack
Dunwoody, Mrs. Gwyneth (Exeter)
Hughes, Rt. Hn. Cledwyn(Anglesey)


Ashton, Joe (Bassetlaw)
Dunwoody, Dr. John (F'th &amp; C'b'e)
Hughes, Roy (Newport)


Astor, John
Eadie, Alex
Hunt, John


Atkins, Ronald (Preston, N.)
Edwards, Robert (Bilston)
Jeger, Mrs. Lena(Hpb'n&amp;St.P'cras,S.)


Atkinson, Norman (Tottenham)
Edwards, William (Merioneth)
Jenkins, Hugh (Putney)


Awdry, Daniel
Ellis, John
Jenkins, Rt. Hn. Roy (Stechford)


Bacon, Rt. Hn. Alice
Emery, Peter
Johnson, Carol (Lewisham, S.)


Barnett, Joel
Ennals, David
Jones, T. Alec (Rhondda, West)


Baxter, William
Ensor, David
Judd, Frank


Beaney, Alan
Evans, Albert (Islington, S.W.)
Kerr, Dr. David (W'worth, Central)


Bessell, Peter
Evans, Fred (Caerphilly)
Kerr, Russell (Feltham)


Bidwell, Sydney
Evans, Gwynfor (C'marthen)
Lane, David


Binns, John
Faulds, Andrew
Lee, Rt. Hn. Jennie (Cannock)


Booth, Albert
Fernyhough, E.
Legge-Bourke, Sir Harry


Bottomley, Rt. Hn. Arthur
Fisher, Nigel
Lewis, Arthur (W. Ham, N.)


Boyle, Rt. Hn. Sir Edward
Fletcher, Raymond (Ilkeston)
Lipton, Marcus


Bradley, Tom
Fletcher, Ted (Darlington)
Luard, Evan


Brown, Hugh D. (G'gow, Provan)
Foot, Rt. Hn. Sir Dingle (Ipswich)
Lubbock, Eric


Brown, Bob (N'c'tle-upon-Tyne,W.)
Foot, Michael (Ebbw Vale)
McKay, Mrs. Margaret


Brown, R. W. (Shoreditch &amp; F'bury
Forrester, John
Mackenzie, Gregor (Rutherglen)


Bruce-Gardyne, J.
Foster, Sir John
Mackintosh, John P.


Buchan, Norman
Fowler, Gerry
Mallalieu,J.P.W.(Huddersfield,E.)


Butler, Herbert (Hackney, C.)
Fraser, John (Norwood)
Manuel, Archie


Butler, Mrs. Joyce (Wood Green)
Freeson, Reginald
Marquand, David


Cant, R. B.
Garrett, W. E.
Marsh, Rt. Hn. Richard


Carmichael, Neil
Gilmour, Ian (Norfolk, C.)
Maxwell-Hyslop, R. J.


Castle, Rt. Hn. Barbara
Ginsburg, David
Mendelson, John


Channon, H. P. G.
Goodhart, Philip
Mikardo, Ian


Chapman, Donald
Gordon Walker, Rt. Hn. P. C.
Millan, Bruce


Chataway, Christopher
Gray, Dr. Hugh (Yarmouth)
Miller, Dr. M. S.


Clegg, Walter
Gregory, Arnold
Milne, Edward (Blyth)


Concannon, J. D,
Grey, Charles (Durham)
Mitchell, R. C. (S'th'pton, Test)


Conlan, Bernard
Griffiths, David (Rother Valley)
Molloy, William


Craddock, George (Bradford, S.)
Griffiths, Will (Exchange)
Moonman, Eric


Crawshaw, Richard
Grimond, Rt. Hn. J.
Morgan, Elystan (Cardiganshire)


Crosland, Rt. Hn. Anthony
Hamilton, William (Fife, W.)
Mulley, Rt. Hn. Frederick


Crouch, David
Hamling, William
Murray, Albert


Dalyell, Tam
Hannan, William
Neave, Airey


Davidson, James(Aberdeenshire, W.)
Harper, Joseph
Newens, Stan


Davies, Ednyfed Hudson (Conway)
Hart, Rt. Hn. Judith
Ogden, Eric


Davies, G. Elfed (Rhondda, E.)
Haseldine, Norman
Oram, Albert E.


Davies, Dr. Ernest (Stretford)
Hazell, Bert
Orbach, Maurice


Davies, Rt. Hn. Harold (Leek)
Healey, Rt. Hn. Denis
Orme, Stanley


Dewar, Donald
Heffer, Eric S.
Owen, Dr. David (Plymouth, S'tn)


Diamond, Rt. Hn. John
Henig, Stanley
Owen, Will (Morpeth)


Dickens, James
Hooley, Frank
Page, Derek (King's Lynn)


Digby, Simon Wingfield
Hordern, Peter
Palmer, Arthur



Hornby, Richard
Pannell, Rt. Hn. Charles







Pardoe, John
Rogers, George (Kensington, N.)
Vickers, Dame Joan


Park, Trevor
Royle, Anthony
Wainwright, Edwin (Dearne Valley)


Parker, John (Dagenham)
Scott, Nicholas
Wainwright, Richard (Colne Valley)


Parkyn, Brian (Bedford)
Sharples, Richard
Walden, Brian (All Saints)


Pavitt, Laurence
Shaw, Arnold (Ilford, S.)
Wallace, George


Peart, Rt. Hn. Fred
Sheldon, Robert
Watkins, David (Consett)


Pentland, Norman
Shore, Rt. Hn. Peter (Stepney)
Weitzman, David


Perry, George H. (Nottingham, S.)
Silkin, Rt. Hn. John (Deptford)
Whitaker, Ben


Prentice, Rt. Hn. Reg
Silverman, Julius
Williams, Alan (Swansea, W.)


Price, Christopher (Perry Barr)
Snow, Julian
Williams, Alan Lee (Hornchurch)


Randall, Harry
Spriggs, Leslie
Wilson, William (Coventry, S.)


Rankin, John
Steel, David (Roxburgh)
Winnick, David


Rees, Merlyn
Storehouse, Rt. Hn. John
Winstanley, Dr. M. P.


Richard, Ivor
Strauss, Rt. Hn. G. R.
Worsley, Marcus


Ridley, Hn. Nicholas
Tapsell, Peter
Wyatt, Woodrow


Roberts, Rt. Hn. Goronwy
Taverne, Dick



Roberts, Gwilym (Bedfordshire, S.)
Thatcher, Mrs. Margaret
TELLERS FOR THE NOES:


Robinson, Rt.Hn.Kenneth(St.P'c'as)
Thornton, Ernest
Mr. Peter M. Jackson and Sir George Sinclair.


Robson Brown, Sir William
Tuck, Raphael



Roebuck, Roy
Varley, Eric G.

Orders of the Day — FINANCE BILL

As amended (in the Committee and in the Standing Committee), considered.

4.10 p.m.

Sir Charles Mott-Radclyffe: On a point or order. May I draw your attention, Mr. Speaker, to new Clause 28—Loans made on or before 15th April, 1969? Is is a Government new Clause, and my name is bracketed with that of the Chancellor of the Exchequer.
I wish to make it clear that this is a printer's error. I thought that I had better do so straight away, lest when we reached that new Clause you inadvertently cast your eye towards me. If I were to move it, I would do so in terms of

NEW CLAUSE 33

LOAN APPLIED IN ACQUIRING INTEREST IN CLOSE COMPANY

(1) This section applies to a loan to an individual to defray money applied—



(a) in acquiring any part of the ordinary share capital of a close company within subsection (2) below, or


5
(b) in lending money to such a close company which is used wholly and exclusively for the purposes of the business of the company or of any associated company (being a close company within subsection (2) below) of the company, or



(c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (and, if free of interest, assuming it carried interest).


10
(2) Subsection (1) above applies to a close company—



(a) if it is a trading company, or



(b) if it is a member of a trading group, or



(c) if the whole, or substantially the whole, of its income is of one or more of the following descriptions, that is—


15
(i) estate or trading income, or



(ii) interest and dividends or other distributions received from a subsidiary which is it self within paragraph (a), (b) or (c) of this subsection.



(3) Relief shall be given in respect of any payment of the interest by the individual on the loan—


20
(a) if when the interest is paid he has a material interest in the company, and



(b) if, taking the period from the application of the proceeds of the loan until the interest was paid as a whole, he has worked for the greater part of his time in the actual management or conduct of the business of the company, or of any associated company of the company, and


25
(c) if he shows that in that period he has not recovered any capital from the close company, apart from any amount taken into account under the next following subsection.


30
(4) If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the close company without using that amount in repayment of the loan, he shall be treated for the purposes of this section as if he had at that time repaid that amount out of the loan, and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.


35
If under the following provisions of this Act this section applies to a loan part only of which fulfils the conditions in this section, so as to afford relief for interest on that part, the deduction to be made under this subsection shall be made wholly out of interest on that part.

which I do not think the Chancellor would approve.

Mr. Speaker: Order. I had noted that the name of the hon. Member for Windsor (Sir C. Mott-Radclyffe) and that of the Chancellor were down for what seemed to be an all-party new Clause. I thought that the age of miracles had come, but apparently it has not. The correction will be duly made, and the embarrassment to both the hon. Gentleman and the right hon. Gentleman will be removed. The Chancellor of the Exchequer, to move his Motion.

Ordered,
That on Consideration of the Finance Bill any Amendments to the Schedules shall be considered after the Amendments to the Clauses to which those Schedules relate, in the order in which those Clauses and Schedules were considered by the Standing Committee on the Bill, and that Amendments to Schedule 6 (which was committed to a Committee of the whole House) be considered after Amendments to Schedule 5.—[Mr. Roy Jenkins.]

(5) The individual shall be treated as having recovered an amount of capital from the close company if—


40
(a) he receives consideration of that amount or value for the sale of any part of the ordinary share capital of the company, or any consideration of that amount or value by way of repayment of any part of that ordinary share capital, or



(b) the close company repays that amount of a loan or advance from him, or


45
(c) he receives consideration of that amount or value for assigning any debt due to him from the close company.



In the case of a sale or assignment otherwise than by way of a bargain made at arm's length, the sale or assignment shall be deemed to be for consideration of an amount equal to the market value of what is disposed of.


50
(6) Subsections (3), (4) and (5) above shall apply to a loan within subsection (1)(c) above as if it, and any loan it replaces, were one loan, and so that—



(a) references to the application of the proceeds of the loan are references to the application of the proceeds of the original loan, and



(b) any restriction under subsection (4) above which applied to any loan which has been replaced shall apply also to the loan which replaces it.


55
(7) Subsection (1) above shall not apply to a loan unless made in connection with the application of the money, and either on the occasion of its application, or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.


60
(8) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.


65
(9) Expressions used in this section which are given a-meaning by any provision in Schedule 18 to the Finance Act 1965 shall have that meaning in this section, and for the purposes of this section—



(a) 'distribution' has the same meaning as in Part IV of the Finance Act 1965,


70
(b) the question whether a company is the subsidiary of another company shall be determined in accordance with paragraph 9 of Schedule 12 to the Finance Act 1965,



(c) the question whether a person has a material interest in a company shall be determined in accordance with paragraph 7 of Schedule 14 to this Act.



—[Mr. Diamond.]

Brought up, and read the First time.

Mr. Speaker: I have suggested that we discuss with the new Clause the following five Amendments:

(j) In line 13 leave out ' substantially the whole ' and insert sixty per cent '.

(k) In line 20, leave out material '.

(v) In line 21, leave out paragraph (b).

(l) In line 70, at end insert:

'other than sub-sub-paragraph (a) of paragraph (2) thereof '.

(m) In line 71, leave out from beginning to end of line 72.

The Government new Clause 25, and Amendments No. 37, in page 21, line 33, after person ', insert:
'who for the time being devotes substantially the whole of his time to—
(a) the service of a company as an employee or director, or
(b) a trade, profession or vocation carried on by that person or by a partnership of which he is a member as a proprietor or partner
on money applied or on a loan to defray money
(i) in a case falling within paragraph (a) of this subsection, in acquiring shares in the company, or

(ii) in a case falling within paragraph (b) of this subsection, in providing capital (including working capital) for the purposes of acquiring or carrying on any part of the trade, profession or vocation, or '.

No. 44, in page 21, line 43, at end insert:
(3) Subject to the provisions of this section interest is eligible for relief under this section if it is paid by a person on a loan under a scheme set up by the employer for his employee to purchase shares in the company.

No. 45, in page 21, line 43, at end insert:
(3) Subject to the provisions of this section interest is eligible for relief under this section if it is paid by a person on a loan to defray money applied to purchase the assets or goodwill of a trading or professional concern or partnership or to purchase shares in a company where the purchaser is, or is to become an employee or active director of that company.

4.15 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Clause be read a Second time.
We now come to the Report stage of the Bill, and start with one of the areas where there was considerable discussion in Committee. Perhaps it would be


appropriate if I dealt very shortly with the general background, Mr. Speaker, as you have been good enough to suggest that a number of Clauses and Amendments should be discussed together.
We are now proposing to move into a new regime, under which interest on a private loan or overdraft is, except for transitional arrangements and where the loan is in connection with the acquisition for improvement of land, to be treated as part of an individual's disposable income, which he disposes for his private, personal purposes as a matter of his choice. Therefore, it is to be distinguished completely from a business expense, whether properly incurred by a sole trader, partnership, close company or open, public company in running a business. This is a simple, sensible and easily understood distinction which will, I hope, enable us to see our way through all the various suggestions which are being helpfully made to improve the Bill. The consideration given to this matter in Committee made it clear that in the transition from an old regime to a new one we should take care to see that as far as possible no hardship falls on those who had entered into commitments on the understanding of the law as it was and the belief that it would not be changed.
That question is not before us now. What we are considering is the other area where representations were made on both sides of the Committee that one should give consideration not only to business expenses but to quasi-business expenses which were such a reasonable extension of business expenses as to justify the continuance of relief, not during a transitional period but for all time. It is with those that we are now dealing.
I begin with the most simple case of a sole trader carrying on his business. If he borrows money it will he easy for him to establish—and it will mostly be the case—that the money he borrows is in connection with his business. It will be easy for him to establish, therefore, there being no real differentiation between his business activities and others, that the borrowing is necessary in connection with his business. Whether the borrowing is to provide a capital asset, current assets, or current expenses, the interest on it will rank as an ordinary

business expense, and, therefore, it is not affected by any of the provisions of the Bill. So much for a sole trader.
The next item is a partnership. Where the partners borrow for the purposes of the partnership, jointly as partners, then, again, there is the identical situation of the borrowing being for the purposes of the business and interest being allowable for tax purposes. It is not always the case that it is possible or convenient for the partners to borrow jointly, and it may happen that the partners borrow severally in connection with the purposes of the business.
Having regard to the representations made from both sides of the Committee, I do not think that it would be right or sensible to say that we should distinguish so closely between borrowing by partners jointly and borrowing by partners severally as to allow the interest in one case and disallow it in another.
I am, therefore, proposing to the House that we should treat interest as allowable where it is borrowed by one partner for the purposes of the partnership. Borrowing can take the form of simple borrowing of money and lending it to the partnership; it can take the form of buying a stake in the partnership, a stake being a loan which has no date of repayment attached it it, which is very much the same kind of asset. It can take a variety of forms, but essentially it is a partner on his own, or one who is becoming a partner in this way, borrowing money for the purposes of the partnership. That is the essence of new Clause 25. We are considering here a working partner, not a sleeping partner.
We move to a situation which is not dissimilar from a partner or sole trader, the family business—to use a non technical phrase—or the one-man business, frequently run in the form of a limited company. We know of them in the text books as the close corporation. Similarly, where there is a close corporation and the trader or partner in the close corporation, that is to say, someone in the position of a proprietor, borrows to become a proprietor or for the purposes of the company, then, again, that is so similar to the first simple case with which I started as to justify the allowance of the interest on the borrowing.
That is the case with new Clause 33, with which I will now deal in a little


more detail. I hope that I am making it clear that we are looking the whole time at the proprietor or the individual becoming a proprietor. I hope that I am making it clear that we are having regard to the individual who, as a result of the borrowing and as a result of the acquisition of the asset advanced by the borrowing, is taking on a new capacity, if he does not already fulfil it, of being a proprietor.
This would cover the case of the individual buying a stake in the partnership. It would cover the case of an individual who is a director of a close corporation, or becoming such a director, acquiring a substantial stake. The simplest definition of all these cases is that of the person buying a working proprietor's stake in the business—a working proprietor, be it a sole trader, a partner or a director in a close corporation. A working proprietor must mean someone who works, but not necessarily the whole time.
It could not be a sleeping partner as defined for partnership purposes. He does not work for any part of the time. He need not be 100 per cent. employed, because many a sole trader runs more than one business and would be entitled to claim, even if he spent, for example, half of his time with the business.
There has to be a definition of a person who is seriously engaged and working as a proprietor. A proprietor is an easy concept with regard to the sole trader, and with regard to the partner. It is not quite such an easy concept with regard to the close corporation but we are very much helped because the proprietorial interests has been defined for a number of purposes in close corporations. It has been defined as a minimum of 5 per cent. That is a very low figure but it is one which we are proposing to adopt and which we are suggesting to the House, because of the clear precedence and authority on which that figure rests.

Mr. Joel Barnett: Has my right hon. Friend calculated what it would cost in revenue if he removed the 5 per cent. altogether?

Mr. Diamond: No, I have not calculated what it would cost, because it is a principle which I would not be willing to

face. If it is not a 5 per cent. interest, it is not a working proprietor's stake. If it was something less than 5 per cent. it would be almost indistinguishable from an ordinary portfolio investment. It is a principle which I would not recommend to the House and which I would not be prepared to adopt.

Mr. Richard Wainwright: Without in any way reneging on his own principle, is the Chief Secretary willing to concede that it might be the beginning of a proprietorial interest?

Mr. Diamond: Of course it might be, and when it comes to the end of it and succeeds in being a proprietorial interest the man would qualify and the loan would qualify.
I hope that I am explaining the various stages in the argument by which we arrived at the conclusion that it would be right to make the very considerable concessions being proposed, which my right hon. Friend thought should be proposed having regard to the discussion which has taken place in Committee and to the various representations which have been made at various levels. That broadly outlines the purpose of the two new Clauses we are discussing.
Since it is suggested that we discuss these various Amendments at the same time, perhaps I can deal with them, and the detail now. Amendment No. 44 would have the effect of allowing interest to qualify for relief if it is paid by an employee of a company under a scheme set up by his employer to enable him to buy shares in the company. We discussed this at some length in Committee. This proposal is distinguished from the proposals I am putting to the House in the main because it lacks the element constituting a working director's stake.
Nobody wishes to disregard these incentive schemes, but the law has never put them in a favourable position. Before this Finance Bill was produced the law never favourably treated incentive schemes of this kind under the tax law. Indeed, when attempts were made to obtain special benefit under these incentive schemes, the law was altered to remove the possibility of obtaining that special benefit. The law has never given special benefit to these schemes, and there is no reason why it should do so now.
4.30 p.m.
That would not coincide with the philosophy of our proposal and it would make it impossible to hold the line where we have drawn it and where I have previously made clear we intend to keep it, namely, by keeping out ordinary investment in income-producing assets and saying that as long as the loan is incurred to produce on the other side income-producing assets the interest on the loan should be allowed, or it should be allowed to the extent that there is income from the assets.
That is not a proposition which we accept. I have said, and I repeat, that it is a perfectly respectable point of view. I volunteered to the House information concerning other countries where this point of view holds good. I am merely saying that it is not the Government's point of view. It is not my right hon. Friend's view that we should draw the line in that way.
We must draw the line to prevent interest on loans incurred in that way from attracting relief for tax purposes. We must, therefore, reject Amendment No. 34, which would inevitably lead to that situation.

Mr. Edward du Cann: We are grateful to the Chief Secretary for the way in which he is taking us through the arguments prominent in his mind, although to some of us on this side of the House they appear to be sophistry. If we see fit to pass the new Clauses, why will the law regard some forms of ownership of property in a specially favourable fashion and others, possibly equally meritorious, in an unfavourable fashion? That hardly seems to be equitable.

Mr. Diamond: I am not sure that I have taken the right hon. Gentleman's point. He may be referring to the distinction between holding an asset which is property and holding an asset which is not property. He may be making a different distinction. As to the first distinction, he knows that we have, as a matter of deliberate policy, agreed that money borrowed to invest in land or to improve land shall be excluded from the restrictions proposed in the Bill.
However, if the right hon. Gentleman is saying that I am distinguishing between investment which is similar to portfolio investment, on the one hand,

and, on the other, acquiring a proprietorial stake, and if he asks me why I make a distinction between the two, then I say to him that in the case of incentive schemes an employee normally improves his financial position, but does not alter his position in any other respect. He is an employee before he entered into the incentive scheme, and he is an employee at the end of the incentive scheme. His responsibilities are not necessarily different. His stake, his responsibilities and the risk which faces are not necessarily any different.
However, when a person starts to run a business and borrows money for its capital or acquires an interest in a professional practice or partnership business or undertaking, or when a person becomes a director in a close corporation and acquires a proprietorial stake, he changes from being an employee to being a person with new responsibilities, a new stake and new risks. The distinction is very clear and one which we should respect.

Mr. Nicholas Ridley: rose—

Mr. Diamond: I am willing to give way as much as the House wishes, but it might be more convenient to hon. Members if I went through the Amendments and then listened with great care, as I always do, to the points which are made and perhaps reply to the debate later.

Mr. Ridley: To save time, may I ask the right hon. Gentleman this question at this stage? If a close company goes public and floats capital on the Stock Exchange, will somebody who has borrowed money to take up shares in the close company have the interest disallowed as from the day that the company goes public?

Mr. Diamond: If he ceases to be a borrower in a close corporation he will presumably sell his shares or exchange them for other shares in a public corporation. [Interruption.] The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was contemplating a change from a close corporation to a public open corporation. If he was not—and some hon. Members think that he was not—it illustrates the point I made previously, namely, that on Report, in particular, it is convenient that I should have the


pleasure and privilege of listening to hon. Member's arguments and then replying to them.
I come to Amendment No. 37. The main difference between that Amendment and the new Clauses is that the Amendment would allow interest on borrowing by an employee of a company to acquire shares in the company either as an investment or as part of an incentive scheme established by the company. I have already said that we do not propose to treat incentive schemes established by companies in any privileged way under the new law any more than we did under the old law. I need not go over the arguments which I have already adduced.
The effect of Amendment No. 45 would be to allow interest to qualify for relief if paid to enable the borrower to buy himself into a partnership or acquire shares in a company in which he is, or will become, an employee or active director. Therefore, to a large extent, this Amendment covers the same ground as new Clauses 24 and 25, but with the difference that it would enable an employee of a company to obtain tax relief for interest on money borrowed by him to acquire shares in the employing company either as a personal investment or as part of an incentive scheme established by the company.
To the extent that that is happening, I am not able to recommend the Amendment to the House.

Sir John Foster: The Chief Secretary referred to new Clauses 24 and 25. I think perhaps he is reading his old brief and that new Clause 24 should be new Clause 33.

Mr. Diamond: I am referring to new Clauses 33 and 25. I apologise.
I think that it would be more convenient if we discussed Amendment No. 37 at a later stage. I do not know whether the hon. Member for Crosby (Mr. Graham Page) wishes to discuss Amendment (j) now. I understand that this is a consequential Amendment which refers to an Amendment which he has put down on Clause 21. If he wishes me to speak on that, I shall have to refer shortly to Clause 21 and to the way in which he relates Clause 21 to this consequential Amendment.
Clause 21 is designed to prevent individuals from getting interest payment allowed for surtax against dividends by setting up close investment companies with which to borrow money and to buy securities. The Clause provides that in such cases the interest paid by the companies has to be apportioned to the shareholders and charged to surtax. The Clause prevents surtax avoidance in that form.
The problem which then arises is that trading companies and parent companies of trading groups are exempt from the scope of the Clause, and there is no existing definition of a close property company, so that a special rule is needed to exempt such a company. That rule must, of course, be consistent with the Chancellor's policy that individuals shall continue to get tax relief for interest on loans used to buy property. The Clause provides that special rule by exempting a company if the whole or substantially the whole of its income is an estate or trading income.

Mr. Terence L. Higgins: rose—

Mr. Diamond: I will give way shortly. What we are concerned with is the phrase "substantially the whole". That is not defined, and that is what the hon. Gentleman is carrying back into Amendment (j). It is not defined, but it would certainly be more than the figure of 60 per cent. which the hon. Gentleman is proposing, and I cannot, therefore, recommend the Amendment to the House. I have no doubt that the hon. Member for Crosby will wish to explain his case more fully when we come to deal with the main Clause. I do not know whether the hon. Member for Worthing (Mr. Higgins) still wishes to intervene?

Mr. Higgins: I find that explanation absolutely unintelligible. I should be grateful if the Chief Secretary would give an explanation of that point, perhaps not using his brief.

Mr. Diamond: I do not want to resort to the comment that I can only offer an explanation; I cannot carry the matter further than the explanation. I am sorry if the hon. Gentleman finds it difficult to follow.
The hon. Member for Crosby has put down an Amendment to Clause 21 and


consequential to that main Amendment, has put down a minor Amendment on new Clause 33. As I am asked to discuss all the Amendments together, I have to explain what I believe to be in the hon. Member's mind in putting down those Amendments. I hope that I have judged correctly what is in the hon. Member's mind, and I have tried to explain why the Amendments would not apply to Clause 21 nor to this Clause. I do not want to, and could not, rule out the possibility of the hon. Member explaining the point more fully when we come to deal with Clause 21.
Amendment No. 51 is intended to enable the parent company of a close property holding group to be exempt from Clause 21 if its property is held by overseas subsidiary companies as well as by United Kingdom subsidiary companies. This is another example of having to deal with an Amendment to a later Clause which results in a consequential Amendment to this Clause.
The hon. Member for Crosby has put down a consequential Amendment, Amendment (l), which is consequential upon an Amendment to another Clause. I cannot accept Amendment (l) for the same reasons that I cannot accept the Amendment to Clause 21. As it is a complicated matter, I think that it would be for the convenience of the House if we left it until I come to deal with Clause 21.
4.45 p.m.
Amendments (k) and (m) would enable interest to qualify for relief if it is paid on a loan raised to acquire any part of the ordinary share capital of a close company, however small.
If I may go over the argument again, there is a distinction to be drawn between, on the one hand, the individual who has the necessary ability, but not the capital to run a business and who has to borrow to establish himself in business and, on the other, the employee who borrows to buy shares in the company either as a personal investment or under an incentive scheme. In the latter case the employee's position is essentially unchanged. That is the distinction which I draw, and I am unable to recommend the Amendment because it does not fall within the general formula, which I think is a wise one, of a working proprietor's stake in the business.
I come, finally, to Amendment (v), which leaves out paragraph (b) in line 21. The effect would be to eliminate the test of the borrower working part of his time and result in the borrower not having to work any part of his time. That would be on all fours with a sleeping partner, and I regret, therefore, that I am unable to recommend the Amendment to the House.
I recognise that it is difficult for the House to take in all these matters at the first go, especially those who have not had the good fortune to listen to the many speeches made by hon. Members in Committee. When I have listened carefully, as I shall, to the speeches which will be made, I hope that it will be convenient for me to intervene once more to deal with any points which I have failed to cover.

Mr. Iain Macleod: The House will be grateful to the Chief Secretary—although I think that the last quarter of his speech lacked his usual clarity—for the careful explanation that he has given, particularly of new Clause 33, on close companies, and new Clause 25, on partnership, which we are taking with it and to which we attach great importance.
The right hon. Gentleman gave a general introduction, concentrated on one or two points on the Clauses, and then went into the Amendments in detail. I do not propose to make detailed comments on the Amendments, though no doubt hon. Members on both sides will wish to do so.
I wish sincerely to thank the Chief Secretary for the way in which he has responded to what we tried to do in Committee. We can look back with some pleasure on the exercise, which has resulted in something that is unique in my experience of Finance Bills—that we have had no fewer than six Government new Clauses which trench on the single basic point of disallowance of interest. It shows how worth while was the Committee stage.
Each of the six points had its origin in Amendments moved from this side of the House, and I freely acknowledge that on a number of points we had support from other quarters of the Committee. I am grateful for what the Chief Secretary has done in meeting in full the undertakings that he gave to us.
I wish to put to him a point upon which he can perhaps comment in his reply. It relates to the cost of two new Clauses and, in due course, of the other four. The hon. Member for Heywood and Royton (Mr. Barnett) asked what it would cost to remove the definition of "a material interest" in paragraph 7, of Schedule 14 of the Bill, and the Chief Secretary said, in effect, that he was not briefed on that point. That is understandable, but presumably he is briefed on the cost of new Clause 33 as a whole, which was originally new Clause 24, and also on new Clause 25, the partnership Clause, which perhaps was the one that caused most concern in Committee.
The Chancellor originally said that he expected to gather in £25 million divided —I have not checked these figures—as to £20 million in relation to income tax and £5 million in relation to surtax. These concessions are certainly welcome in general terms, although there are a number of detailed points which we shall wish to raise upon them. We should like to know to what extent these concessions would affect the estimates which the Chancellor then put before the House. I hope that the Chief Secretary will deal with the point in his reply.
I come to my second general point. We have before us a very different series of proposals, taking all six Clauses together, from the proposals which were put by the Chancellor in his Budget speech and enshrined in the first draft of the Finance Bill. The old principle was pretty clear, that is to say, that the charge to tax was struck after allowing necessary expenses to attain it. No doubt what the Chancellor wished to do was also reasonably clear, although I would have objected, and have objected, to the principle. He wanted to abolish this principle and to substitute a new one which allowed only loans for purchase or improvement of land, as in Clause 19, to be exempt.
But the present proposal—which I emphasise is much more welcome—is vastly different. Curiously enough, it does not make more defensible, but less defensible, the position which has been taken up. I could understand it if no exceptions at all were made; one would then understand the big exemption for

house building and improvement of land in Clause 19. But as we begin to widen this matter—I emphasise that we are delighted we have succeeded—first, to estate duty, then to partnership, then to close companies, then to all the others, the original principle looks extremely tattered.
I do not want to take back any of my praise to the Chief Secretary, but he said, in response to my right hon. Friend the Member for Taunton (Mr. du Cann), that so far as he was concerned he was drawing a clear line. I am bound to say that he was almost alone in the House in that opinion, and, I have a feeling, on both sides of the House. I do not think that any clear line of argument is left. There is no doubt that the principle had been successful and in some cases triumphantly breached. But the result is vastly less logical, although vastly more agreeable, than the original Budget proposal.
There are a number of points I could make. I emphasise particularly the point raised by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), but no doubt the Chief Secretary is looking that up and will reply in due course, but it seems to be a matter of very great importance.
To sum up, I acknowledge our debt to the Chief Secretary and he, in turn, has been good enough to say that this is as the result of some excellent and hard work in Committee upstairs. I do not think that what the Chancellor of the Exchequer has done makes his proposals more logical. I believe that they are less logical. I would very much welcome in due course an account, so far as it can be given, of the cost of these particular proposals.
In conclusion, I should like to say a few words on new Clause 25. This involves the principle of loan for partnership, to which we attach the very greatest importance. It is particularly welcome to have this most important change. For the reasons I have given, the proposal of the Chancellor in his Budget speech, which has now been very much altered, remains objectionable to us, and in due course I will make clear my attitude on behalf of our party to the whole of these Clauses.
But it is appropriate that on the first Clause I should acknowledge that the Chief Secretary has done everything he


could to meet the pressure put upon him in Committee. Although there are many detailed points which no doubt hon. Members will wish to press, we are very glad to see these new Clauses on the Notice Paper.

Mr. Graham Page: Mr. Speaker has selected Amendments to new Clause No. 33 for debate with new Clause No. 33. Therefore, I propose to address my remarks to the Amendments lettered (j) and (l) in the names of my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) and myself.
As I understand new Clause No. 33, it allows an individual who has become a working proprietor to deduct from his taxable income interest paid on a loan which he has used in the purchase of a working proprietor's stock in a closed company, but in a close company of a certain type described in new Clause 33.
5.0 p.m.
That kind of close company is described in subsection (2) of new Clause 33 as one which is a trading company, a member of a trading group or where the whole or substantially the whole of its income is of one or more of the following descriptions, that is estate or trading income, or interest and dividends, or other distributions received from a subsidiary which is itself within the previous paragraphs of the subsection. It is a very special kind of close company.
Taking paragraph (c), a holding company which has income of a kind other than estate or trading income or income from what I will call qualifying subsidiaries may be excluded from new Clause 33. In other words, any individual purchasing a working proprietor's share by means of a loan in such a company may not be able to charge the interest on that loan against his taxable income. It will be excluded in that way if it is income which is substantially of the kind described in subsection (2).
What other income might such a company have than trading income or estate income? Let me take the case of a property investment company and at once declare an interest in that I am taking the example of a company in which I hold a directorship but in which I have no beneficial interest.
This company, like many other property investment companies, has its

income not only from subsidiary companies which hold property but also from assets held in reserve. A wise property investment company always holds liquid money in reserve to take advantage of a good bargain when it is offered. I am sure that the Chief Secretary will know, for example, that a property investment company of, say, £30 million would be likely to hold some £4 or £5 million in a fairly liquid form.
At present, it is common practice for such companies to invest in loans to local authorities. I would venture to say that there is hardly a property investment company of the type that I describe which has not got substantial investments in loans to local authorities which can be realised very quickly—sometimes seven days, sometimes three months, or perhaps six months—kept there for the purpose of taking up a bargain should it appear in the market.
If it is receiving income from that source, it is receiving a type of income which may disqualify it from being a close company as defined in new Clause 33, and it will be disqualified if its other income is not substantially trading or estate income.
What is substantial? In Amendment (j), I have made a plunge in trying to define what is substantial. I have taken a reasonable figure over a number of companies of this sort, perhaps in favour of the companies but not very much so. It is somewhere near the right sort of figure. The Chief Secretary said that "substantial" would be very much more than 60 per cent. How much more? Are we to leave it to the courts to decide? If we leave a vague word like "substantial" in legislation, it is inviting litigation, and there has been litigation over many years on the word "substantial".
We have come to know what it means in the Rent Acts over furnished dwellings, where £13 per annum of an £80 per annum rent has been held to be "substantial". We know what it means in connection with industrial development, where in one case 1,000 firms out of 6,000 were held to be "substantial" and 150,000 employees out of 470,000 were held to be "substantial".

Mr. Robert Sheldon: May I remind the hon. Gentleman that the wording is "substantially


the whole", which is quite different from "substantial".

Mr. Page: It is just as vague as the word "substantial". I cannot find that the phrase "substantially the whole" has ever been defined by the courts. Perhaps we go back to the 1866 case, where it was held that an hour of gaslight substituted for an hour of daylight is undoubtedly substantial. By this Amendment, I was hoping to bring a moment of daylight into an hour of murky gaslight of a Finance Bill, but the Chief Secretary does not seem to be forthcoming on that point.
My Amendment seeks merely to define what is meant by "substantial". If I am wrong in my 60 per cent., let us have the right percentage and not just a statement from the Chief Secretary saying that it is very much more. The courts may or may not pay attention to what the Chief Secretary has said on the Floor of the House. They are under no obligation to do so, and I do not know how the courts will construe this.
I pass, then, to Amendment (l), which is perhaps not exactly self-explanatory. Let me use the same example of the company in which I hold a directorship. The company has developed a number of properties in Australia by means of subsidiary companies in Australia. It has done so with all the flourish of authority from the Bank of England. It might almost be said that it has been done with the blessing of the Bank, because the company has been encouraged to develop overseas on the right sort of development.
In subsection (9)(b) of new Clause 33, we are told:
…the question whether a company is the subsidiary of another company shall be determined in accordance with paragraph 9 of Schedule 12 to the Finance Act 1965.
Schedule 12 of that Act was for a totally different purpose. It was for the distribution of the assets of a close company. Nevertheless, we have to turn to that definition of a subsidiary. It says:
In determining under this paragraph whether one body corporate is a subsidiary of another, that other shall be treated as not being the owner—(a) of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom".

Again, using my example of the holding company in the United Kingdom with subsidiaries in Australia, it has to treat the income from those subsidiaries as not being income from subsidiaries, because they are not to be treated as subsidiaries for this purpose, and therefore it will be income of the type which may disqualify it from being a close company under new Clause 33.
The Chief Secretary will see, if he has followed my story this far, that when I start to add the income from loans to local authorities to the income from Australia I am coming very near the 40 per cent. That is why I have chosen 60 per cent. Why should a close company be excluded merely because it holds fluid assets for quick investment and holds some overseas properties in its portfolio? I see no logic in this in relation to new Clause 33. As the Chief Secretary has rightly said, new Clause 33 deals with someone wanting to become a working proprietor—in this case of a property investment company—who borrows money to do so. This is the side of the picture on which the Chief Secretary has concentrated and on which the new Clause and the whole principle in the Bill has concentrated. It is not so much on the nature of the company as the interest of the person going into that company.
Therefore, I think that these two Amendments are reasonable in clearing up not only a difficulty of construction, but in bringing into the new Clause the company of normal structure which is doing nothing immoral or wrong in the way that it holds its assets.

Mr. John Nott: First, I should like to add my welcome to that of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) for the new Clause. In Committee, we argued long into the night about this subject and, in particular, about the iniquities of the Chancellor's original proposals. I am glad to see that at least some easing of the rigidity of the Clauses has taken place.
In moving an Amendment on this subject in Committee, I commented that Clause 21, as originally drafted, placed upon close companies almost as many disabilities as Clause 22 and Schedule 14 removed. But new Clause 33 will undo


much of the harm contained in the original drafting.
As the small companies of this country, of which a major proportion are close companies for taxation purposes, still employ up to half the total manufacturing labour force and account for not far short of half the industrial sales, we are naturally delighted that a young partner, without any capital of his own, will now be able to borrow the money to buy an interest in such a close company without having an intolerable interest burden placed upon his shoulders.
I welcome this concession. However, I use "concession" in its traditional Finance Bill way, rather than what might be described as the true meaning of the word. A concession can be defined, in the vocabulary of Socialist taxation purposes, as the mere undoing, in part or in whole, of the unnecessary damage which has already been inflicted upon the individual and upon companies by earlier Labour Government forays. In the coming pre-election hand-out—which we all anticipate fairly soon, when I hope that the Chancellor will be giving back part of the £2,000 million of extra taxes to those from whom they came—it will be deemed a concession by the Chancellor and we will be considered carping and impolite not to welcome it with open arms.
Higher taxation is the oil that keeps the wheels of Socialism turning and those Socialists who squeak the loudest on the other side get the most oil. Therefore, I hope that we will not be criticised by the Chief Secretary for making a few remarks about the anomalies which new Clause 33 throws up.
The Chief Secretary had to erect a principle upon which to stand, because he knows that it is something which we cannot dispute. The principle that the right hon. Gentleman has erected is that there is inherently something much better much more desirable and far less obnoxious if someone owns 5¼ per cent. rather than 4 ¾ per cent. of the capital of a close company. I understand that the Chief Secretary needs to erect a new principle to support this ridiculous position. But to try to defend a situation in which a proprietor can be defined as having 5¼ per cent. and a non-proprietor as having 4¾per cent. of the capital seems completely absurd.
In Committee, when we were debating the definition of a material interest, the Chief Secretary, referring to the 5 per cent., defended it by saying
such a holding as will be what the lawyers call de minimis—in other words, of such a quality as not to be taken into account."—[OFFICIAL REPORT, Standing Committee F, 23rd June 1969; c. 573.]
5.15 p.m.
This was one of the principal reasons which the Chief Secretary introduced in support of the retention of 5 per cent. as the amount which should continue to define a material interest.
The right hon. Gentleman went on to give examples. But he is turning the argument on its head. It is one thing to take 5 per cent. For the purpose of director-controlled pension schemes, and to take 5 per cent. as being the definition for full-time service directors. But we are discussing someone here who is seeking to obtain a small interest in a company, so it is turning the argument on its head to stick to the 5 per cent. rule, the de minimis provision, as the Chief Secretary defined it in Committee, for the purpose of defining what is a valid partnership shareholding.
This concession which the Chief Secretary has made for a working partner will throw up some of the most absurd situations, and I will mention one or two. It implies that there is something more desirable and less obnoxious to the Chancellor for a man to borrow against a 5 per cent. stake in a close company than an employee of that close company who wants a smaller holding in it. This is not a sensible distinction. I realise that the Chief Secretary is bent upon the principle, but it is not a wise distinction.
It then implies that there is something more desirable and less obnoxious to the Chancellor in the proprietor's shareholding of 5 per cent. in a close company than an employee's or a director's 5 per cent. in a non-close company. I realise that the Chief Secretary has had to erect a principle upon which to stand, but it does not make sense to anyone else.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) referred to one point, which I am sure he will develop ft alter. What happens if a close company goes public? The Chief Secretary got involved in a discussion about an exchange of shares.


There is no exchange of shares involved. The same shares are still in issue. If a close company becomes public and more than 35 per cent. of its shares are held by the public, then, as I understand the rules, the loan which might have been outstanding will no longer be eligible. So, here again, we have another anomaly.
The Chief Secretary rested upon the argument that employees' incentive schemes had never been put in a favourable position. If by that he was referring to someone who owns 4¾ per cent. in a close company rather than someone owning 5¼ per cent. of the share capital of a close company, I merely comment that he has now put in a specially favourable position the proprietors of close companies, partners in a partnership, and a whole host of other people. As the right hon. Gentleman is now beginning, for the first time, to erect special privileges, it does not lie in his mouth to claim that employees' incentive schemes have never been in a special privileged position. It is the right hon. Gentleman, and not us, who is erecting privileges. My conclusion is that if employees or directors of a public company wish to hold shares in a company for which they work, in other words, to have an incentive in their business, that public company must turn itself into a close company. I worked out, in three minutes in the Library, quite a useful incentive scheme under which those who wish to propagate incentive schemes for employees in non-close companies, or those who wish to work out incentive schemes for someone who has a 4¾ per cent. holding instead of 5¼ per cent. holding, can create a close company to get their overdraft interest allowed. I shall be very surprised, from a careful reading of the provisions to learn that they would be caught. I am told by one of my hon. Friends that they would be. Perhaps the Chief Secretary will explain how. It seems to me that it will be easy to find a way round the problem.
To me the situation is quite idiotic. It shows that the whole disallowance measure in the Bill is either workable and grossly unfair, which is how we started at the beginning of the Committee stage, or it is partially fair but grossly unworkable, which is the situation at

which we have arrived now. The only result is to make our tax system fiendishly more complicated than before, and almost impossible for anyone who is not an expert in these matters to know whether his interest will be disallowed or not.
Although I welcome the concession, it has thrown up the most hopeless anomalies, and great unfairness in a large number of situations, only some of which I have referred to.

Sir Eric Errington: Can my hon. Friend tell me whether, and where, the 5 per cent. about which he has been talking appears in this long Clause?

Mr. Nott: The Clause says at line 72 that
a material interest … shall be determined in accordance with paragraph 7 of Schedule 14 to this Act".
It is that paragraph which defines a material interest as being 5 per cent.

Sir E. Errington: I am much obliged to my hon. Friend.

Mr. Sheldon: Like so many others, I welcome the second thoughts of my right hon. Friend. There is no question but that this has caused great concern, because the rewriting of these complex provisions was obviously no easy task. We all very much respect, and are grateful to, my right hon. Friend for redefining his attitude in this way, when it would have been so much easier to have dug his heels in and said that any changes should await discussions over the next 12 months. Our first thought must be one of gratitude, and I should like to express mine here.
Following the point made by the right hon. Member for Enfield, West (Mr. Iain Macleod), I wonder whether my right hon. Friend could tell me, not only how much revenue is now expected, but whether he can separate the amount of revenue expected from the disallowance of surtax, and from the disallowance of income tax? From the beginning my support for this measure sprang from my belief that there would be a large amount of money from surtax avoidance. When I found that the sum involved was only £5 million, my enthusiasm diminished considerably, and I wonder by how much more it might diminish if I find that £5 million is very much further reduced.
In the new Clauses put forward by my right hon. Friend, it seems that partnerships are being given certain preferences over those who take on minor directorships. This is something about which I have always been concerned, mainly because I have always felt that we have shown greater preference for commerce and the professions than for industry. It has always been the burden of complaint by industry that the Government have tended to understand the City rather better than they have understood industry, a complaint which has been reduced rapidly during the lifetime of this Government by the setting up of various organisations which have worked hand in hand in hand with industry, to the benefit of both industry and the Government.
My preference that we should do something more for industry, because this is where we have been so lacking in the past is not made clear by the new Clauses, because here we are creating a second class of director who is not able to get the small holding as easily as I should like to see in the company for which he works. This is easy to over-state, and I should not want to do that. In some of the small companies 5 per cent. is a very acceptable minimum holding, but there is an increasing number of cases in which 5 per cent. represents a very large amount, indeed. The first rung of the ladder, being so often the hardest, should be shortest. It should be fairly close to the bottom, and because of this provision we are imposing an unnecessary barrier in starting off in this direction.
I have always felt strongly about the small family company changing over from the hereditary element and making use of some of the talent within the company. As one makes use of that talent, it is fairly clear that at some stage those who are being made use of in that way will need to acquire a stake in the company. We know that capital is unlikely to be available for these people. Because of this, I have always felt that it is here that the strongest case can be made for granting a concession to those people who can be induced to have an interest in the firm. We now have a first rung of 5 per cent., and I am sorry that the concession in this case did not go all the way.
My right hon. Friend's principle was that less than 5 per cent. would be more like a portfolio investment than an actual participating investment. I do not see this point of principle. If a person is working full time in the organisation, this is not a portfolio investment. It is a direct investment in his own interest and in the interests of the firm in which he operates.
My right hon. Friend said that past Governments had never favourably treated those who invested in their own firms. My reply is that it is about time we did treat them more favourably. If we are concerned about the level of managerial expertise, and the development of trained professional managers, in these companies, it is about time we gave them certain preferences, and it is not sufficient to say that we have not done so in the past. We are bringing forward fresh legislation which inflicts some small penalty on these people. I am saying that the penalty should be removed, and if possible be replaced by some incentive, but I am not asking for that at this stage. I do not complain that these people are being favourably treated. My objection is that they are being unfavourably treated.
I do not want to sound critical of my right hon. Friend, and I apologise if I do so, because I realise the assistance that he has given by bringing forward these new Clauses, but this important point is still missing, and it is something to which I hope he will gibe his attention.

5.30 p.m.

Mr. du Cann: I agree very much with the concluding remarks of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) but I cannot begin my own short speech in the same way as he began his, by paying the Chief Secretary a tribute. I would rather follow the theme of my hon. Friend the Member for St. Ives (Mr. Nott)—that of complaint. We all enjoy listening to the Chief Secretary, always. He invariably speaks well, he is one of the most clear-minded men in the House and he is backed by practical experience. But his speech today was an attempt to defend the indefensible. The original Clause was intolerable. He has now mitigated it somewhat, but it is by no means enough.
I complain about the proposals which we are discussing in the round for these reasons. First, the Chief Secretary, like the hon. Member for Ashton-under-Lyne used the word "complexity" several times. These new Clauses themselves are long and involved. Surely good law should be clear law. There is far too much complexity in our existing laws. My chief complaint is that, if anything, the law in this field is to be more complex than ever. I find no merit in that.
Second, I disliked intensely the use by the Chief Secretary of the word "concessions". That is an Irishism. I am pleased to see new Clauses Nos. 33 and 25, but the Chief Secretary and the Chancellor were wrong in the first place. They should not now come to the House seeking to obtain credit for rectifying that wrong. We would give them warmer applause, and generous applause, if they were to do a more honourable thing—namely, acknowledge that they had erred, and badly erred, in the first place.
We heard a good deal from the Chief Secretary about stock proprietors. I do not think that he knew what he was talking about. What this Clause does, even as it is now proposed to be amended, is to rule out almost entirely any form of wider stock ownership. How dare the Chief Secretary say that one form or one degree of stock ownership is meritorious and one is not? What arrogance. If a man borrows a few pounds to buy a single share in any company with which I am concerned, I regard that as meritorious, and if he goes on to 5 per cent., so much the better. Why should the Chief Secretary say that he will do nothing for those people, who are the small stockholders of today and may be the larger stockholders of tomorrow?

Mr. Diamond: I should like to ask the right hon. Gentleman when I said that one category was meritorious and one was not.

Mr. du Cann: But that is the precise inference of everything that the right hon. Gentleman said today and everything which he proposes in the Bill and the new Clauses. That is clear beyond any doubt. I take quite a different view from him—that anyone who buys stock, irrespective of amount, in any type of company for which he works, and becomes

thereby a proprietor is as much a real proprietor as the kind of people whom the Chief Secretary only has in mind. Not only does he rule out wider share ownership: he also rules out the injection of capital into smaller companies by individuals. Why, I cannot imagine. This point was well made by the hon. Member for Ashton-under-Lyme.
Last, but by no means least, he rules out success. He says in effect to a company, "Keep small, and the people concerned in your management can borrow to buy stock in the company, but the moment you get large, the moment you succeed, I will rule you out of court and, speaking comparatively, penalise you." That must surely be wrong. It is not surprising that the cynics are saying that, when there is a Labour Government, the rich get richer, but it is rough on the man who tries to stand on his own feet and advance himself by merit.
There has been reference also to a worthwhile Committee stage. I take the view that the discussions during the night in Committee were largely unnecessary. I see no merit in them at all. The fact that they were conducted largely in secret is another matter to which I have the gravest objection. The sooner that we bring the Committee stage of the Finance Bill back to the Floor of the House the better.

Mr. Nott: Is my right hon. Friend also aware that the Chancellor is not here now, and was not present throughout the whole of our Committee debates? Since the right hon. Gentleman tabled all these monstrous suggestions, does not my right hon. Friend think that he should be here now?

Mr. du Cann: The arrogance with which the Chancellor treats the House of Commons is one of the most unattractive features of his holding of that office. I know that he was not present in Committee, and I note that he is not here today. He is, of course, not very interested, apparently.

Mr. Diamond: My right hon. Friend was sitting here for about an hour and has had to go off to a Cabinet Committee—[An HON. MEMBER: "Very good of him to be here."] I am not concerned with whether it was very good of him or with the pomposity of the hon. Member's comments. I am concerned with


the accuracy or inaccuracy of the comments of the right hon. Member for Taunton (Mr. du Cann). Perhaps he would put the matter right.

Mr. du Cann: Of course I saw that the Chancellor was here for a short time, but he then disappeared. We have been discussing this new Clause for some time—I am delighted that the Chancellor has returned and that he is listening to the views of his friends and colleagues, whose main concern is to get a little sense into the economic direction of our affairs. That is all that any of us are at. I say this while he is here and I am glad of the opportunity—it is particularly satisfactory that he is here, because he may learn a little about what is going on. For instance, the account which he gave the House the other day of growth in investment was, in my opinion, substantially misleading. The sooner he realises the present facts of the economy the better.
I was saying that we had, apparently, a worthwhile Committee stage. The truth is that the Committee debates on Clause 18 should not have been necessary. In his excellent short speech, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said that he loathed these discriminatory and absurd provisions as much as many of us here and many more outside the House. He gave us to undersand that he would be making a clear declaration of the Opposition's view. My view—I dare say that my right hon. and hon. Friends will share it—is that there should be a substantial change in the proposals in Clause 18 and some other Clauses. I hope that, on Third Reading, my right hon. Friend will be good enough to make this clear.

Mr. Barnett: There is something about Finance Bills and tax measures which seems to bring out the worst in the nicest possible people. The right hon. Member for Taunton (Mr. du Cann) is one such. The hon. Member for St. Ives (Mr. Nott) is a particular example. In Committee and today, he seems to lose his rag, gradually but very charmingly, as he builds himself up in his speech on a tax problem of this description.
I also want to say a personal word of thanks to my right hon. Friend, even if this provision comes rather later, even

if he did not see beforehand what some of us thought was wrong. I do not want to be churlish about this. I am grateful for the concessions—I will call them concessions, even if the right hon. Member for Taunton is not prepared to—but what this large number of new Clauses proves is that, on a very complex new proposal of this kind, a Select Committee on these problems could he of considerable value.
I know that the usual arguments is that, by announcing a tax measure in advance, one enables taxpayers to take avoiding steps. But I do not see why they should not do so anyway by the time it comes on the Statute Book. Any complex measure could do nothing but good if it were discussed for, say, 12 months before reaching the Statute Book. Certainly, one like this could have been of considerable value.
But it is important, because the case against this whole measure, against loan interest, has been so overstated, at least to put in some perspective the situation which existed before. To listen to hon. Gentlemen oposite, one would think that they have never heard of the abuses which were taking place under the old system.
I need not remind lion. Gentlemen opposite of the sort of abuses that took place. For example, taxpayers were legitimately able to make in some cases considerable sums by borrowing and setting off the interest against income while making capital gains, certain capital gains in many instances. Under the old system that sort of taxpayer got a considerable advantage over other taxpayers; that is, millions of taxpayers who were borrowing on hire purchase and under credit instalment schemes. There were, therefore, a number of anomalies long before these provisions were introduced. I mention this to get the matter into some sort of perspective so that we may understand what prompted the Chancellor to introduce this proposal in the first place.
I confess that I was somewhat surprised at the amount of revenue that was originally to be raised. It was £25 million plus the fact that only £5 million of it was to come from surtax payers. I am not sure how it was decided that only £5 million should derive from that source because we are speaking of the margin and the fact that people with investment income of over £2,000 a year would find


that some of their interest would, in most cases, be applicable for surtax.
I would be interested to know how the calculation was made because I cannot help thinking that, like other statistical errors of which we have heard recently, one further error may have been made in this case, with the result that the proportion applicable to surtax may be somewhat larger than we have been led to believe.
I return to the new question of principle to which the Chief Secretary referred. The case for the 5 per cent. concept need not be overstated. In many cases of close companies in which less than 5 per cent. of the shares have been taken up the people concerned will be given an opportunity to pay for them over a period of time and the percentage will therefore be available to members of the staff. The case does not need restating as my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made the important point against the principle which the Chief Secretary adduced when he referred to the need to give young managers and executives in growing close companies positive encouragement. We must realise the great problems which every managing director and chairman faces in finding the right sort of executives. It is positive encouragement that is really necessary; but in this case some help can he provided simply by removing a slight discouragement.
The Chief Secretary introduced the new principle of proprietorial interest. When I asked about the cost of the 5 per cent. he said that he was not even prepared to consider what the cost would be, even if it was negligible, because the principle of proprietorial interest had been set at 5 per cent. It was rightly pointed out, however, that this is an odd sort of principle because at 5¼ per cent. everything is satisfactory and the interest is allowable while at 4¾ per cent. it is not.
I appreciate that once one has a dividing line anomalies will be created. I pointed out in Committee that the only way to avoid such anomalies in respect of loan interest would be to disallow the lot, as the Minority Report of the Royal Commission suggested; but that would require an international agreement. Thus,

whatever one does, a great many anomalies will be created.
It follows, therefore, that we must consider if the anomaly of which we are speaking is worth creating by having a dividing line based on proprietorial interest. Would it not be wiser to accept the Opposition suggestion, bearing in mind the fact that the principle would not necessarily be infringed because any employee taking up less than 5 per cent. would still need, even if the Amendment were made, to be working for the greater part of his time in management or in the conduct of the business of the company? This would be a sufficient dividing line. In other words, if an employee is involved in the conduct of the business, he should be able to take up any percentage of shares in a close company.
5.45 p.m.
I accept that my right hon. Friend was right to leave it to close companies. He must, therefore have been right in his reply to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), since if one is not to allow open company investment as an allowable item of interest, then once a close company becomes a quoted or open company, that amount of interest would not be allowable. If it were, one would be creating another anomaly.

Mr. John M. Temple: The hon. Gentleman is explaining why there should be a difference between the two types of company. Has he considered the question of unlimited companies, since it is possible today for close companies to turn themselves into unlimited companies?

Mr. Barnett: The question of an unlimited company would not be dissimilar in that it might be an unlimited but a non-close company. However, we are talking about close companies, and we had better leave it at that.
Accepting even the Chief Secretary's desire to have this principle and, therefore, the need for a dividing line, it should be sufficient to stipulate less then 5 per cent, or any percentage. In other words, there should be no need to create a new anomaly. It should be sufficient that an employee engaged in the management or conduct of the business should be able to borrow to buy shares, and I hope that my right hon. Friend will find


it possible to accept the Opposition proposal to this effect—while making it clear, however, that it is not a matter of enormous significance. I am sure that if he checks the cost, he will find that it would be infinitesimal and that the principle involved would not be infringed.

Mr. Michael Shaw: I agreed with nearly everything that the hon. Member for Heywood and Royton (Mr. Barnett) said. The most important part of this debate hinges on the ability of the employee, be he a director or anything else, to acquire a stake in the company. Along with that we must decide whether or not there should be a dividing line at the 5 per cent. level.
The debates in Committee on this subject and our discussion today remind me of the debates we had last year on the aggregation of children's income with that of their parents. First, a principle was established. It was then seen from the debates that alterations had to be made. Specious reasons were found to enable exceptions to be related in a vague way to the originally enunciated principle. The result was to make the whole position untenable. That exercise has been repeated on this issue despite—perhaps because of—the concessions that have been made, welcome though they are.
We must accept that many close companies today have substantial capital requirements. Figures of £500,000 and upwards capital are common. If a young director has to acquire a 5 per cent. shareholding in a £500,000 capital company he has to have a considerable holding. If he can take the full £25,000 he will have the advantage of offsetting the loan interest against his income, but a young director offered a £10,000 holding does not have that advantage and that does not seem equitable. This difference is absolutely artificial.
I am particularly interested in two Amendments suggested to the new Clause, one of which is starred and in my name. Here we are up against a real difficulty in that most of the Amendments—there are 135 Government Amendments to be considered on Report—have appeared very much at the last moment, over the weekend. One therefore has had great difficulty in going through them all and

consulting people outside who are interested in the matter and forming a conclusion. The new Clause itself is welcome because it goes along the path of widening the original concept, but on the question of proprietors and their treatment we are working at cross purposes in this new Clause with what is attempted in Clause 22. That Clause removes the various distinctions which restrain the amount of directors' remuneration that can he paid in close companies.
No longer in future will close companies be limited as to the amount of remuneration they can pay directors. From now on directors working full-time in a business and holding less than 5 per cent. of the capital can continue to be paid any sum and it will be allowed for corporation tax. If they owned more than that number of shares the amount of remuneration allowable was previously limited. If they worked only part-time usually it was disallowable. All those distinctions have now gone and all directors, full-time or part-time, provided the remuneration is in relation to the work done, will be treated equally. Yet now a new distinction is to be made whereby some directors will be allowed to borrow money and have the interest set off against income for the purposes of shares while others will not. It seems that we shall never get things made more simple. If we accept that all directors should be treated equally with regard to remuneration we should treat them equally when it is a question of borrowing money for the purpose of shares.
Often in close companies directors work part-time because they have other interests in other businesses, but they play a vital part in the prosperity of the Company. They may be financial directors or persons who have been asked to join with the person who does the actual day-to-day running of the company to get it on its feet, and they put in a considerable amount of money. The essence of the close company is that, much more than a public company, it has to seek working capital from within the resources of the directors and the shareholders themselves. That has never been more true than it is today. From the personal qualities of the directors and their personal resources the working capital must be found.
Although a director may not work whole-time in a business, he may be called upon from time to time to lend money to that company. He should equally be allowed, when he finds that money to assist the company, to have the interest charged against his income. The whole concession that has been made brings in its train, through the way in which it has been done, complications which are illogical and entirely unnecessary. The more the principles which are claimed to lie behind this legislation are explained and the more exemptions granted, the more clear it becomes that the proposals relating to Clause 18 and the new Clauses which go with it are ill-founded.

Mr. Richard Wainwright: The two new Clauses represent a clumsy act of repentance by the Government. As the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) reminded the House, it is an act of repentance at a most inconveniently late moment so that the new Clauses have not been subjected to thorough discussion in expert circles. It has been difficult for hon. Members on the Opposition side of the House to have consultations about them. One wonders whether there has been sufficient consultation by hon. Members on the Government side. I doubt whether hon. Members are wise, even though it is charitable, to give a qualified welcome to these new Clauses because the complexity and, even more, the uncertainty which they contain will cause a great deal of trouble to the Board of Inland Revenue, the courts and —more important—the taxpayer, in years to come.
The new Clauses do not approach the only reasonable way in which to tackle this very important and, in many ways, desirable question of getting rid of indiscriminate tax relief for loan interest. No party has been more enthusiastic than mine in wanting to get rid of that indiscriminate relief. As many other countries discovered in tax law long ago, the only way to deal with the question of whether loan interest should properly be allowed or disallowed is to set up an account of the taxpayer's affairs. On one side there should be the interest on the loan and on the other any taxable income arising from the use to which the loan has been put. Until such an account

has been set up relating the taxable income arising from the use of the loan to the interest which represents the cost of the loan, we cannot begin to have an equitable basis for allowing or disallowing tax.
In such a simple account, if the loan had been used only for the purpose of pleasure or mere personal benefit there would be a nil entry on the side of the taxable income resulting from the loan. In those circumstances it would be entirely proper, and it ought to have been done long ago, to disallow the whole of the interest. Where the loan is raised to make an investment which in any one year produces some taxable income it is only reasonable that that should be set off against the loan interest which was in question on disallowance. The way the Government have tackled the matter is producing uncertainty and giving the Revenue the advantage both ways. To that this House should never consent.
6.0 p.m.
I speak particularly to Amendment No. 37 in the names of two of my hon. Friends and myself, the broad purpose of which, in contrast to new Clause 33, is to eliminate both the limitation to a close company and the limitation as to which we have already heard much good sense this afternoon—the arbitrary limitation of the 5 per cent. minimum holding.
As to the Government's intention to allow this relief only where a close company is involved, the House should be given much more time to reflect. Right or wrong, this puts the concept of close company to an entirely new use. Hitherto, the concept of close company has been invoked by Governments of various shades for revenue purposes because, theoretically at any rate, a close company has much more opportunity of arranging its affairs to minimise its tax obligations. Therefore, in one way or another it is reasonable that such a company should be set apart from others and subjected to a certain amount of supervision and restriction.
This is not the use to which the close company is being put in the new Clause. The close company is being singled out, for the first time in our tax legislation, for quite a different purpose. We have not heard sufficient justification for this


innovation. Neither side of the House has had time to reflect on this wholly new importation into our tax legislation. In any case, I cannot see why this incentive, this honourable scheme of share purchase in a company, should receive Government encouragement only when a close company is involved.
The second point of difference between the Liberal Amendment and the Government's new Clause relates to the strange arbitrary minimum. I do not wish to cover the ground which has been so well covered already, but I emphasise that in legislation for this purpose there can be no virtue in legislating by way of percentage, because in two different breaths one may be considering 5 per cent. of one of the largest glass-making companies in the world, for instance, or 5 per cent. of a newly established grocers shop. It is manifestly unfair to deal with these in the same breath for tax purposes.
My constituency, which was the centre of very early industry, has a large number of very important close companies. In that area people with as much as 5 per cent. in certain well-known wool textile or engineering concerns are the lords of creation. Nobody regards them as small fish because they have 5 per cent. in some of the big companies in my constituency. Yet I readily concede to the Chief Secretary that there are other companies so small that 5 per cent. could be represented as merely trivial. Therefore, the choice of a percentage as the vehicle for the Government's second thoughts is wholly unfair, and I hope the Government will have third thoughts on that. Share purchase by executives—by anybody working for a company—is to be encouraged, and it must be recognised that it must start small.
I pointed out to the Chief Secretary in an intervention that a man may start with perhaps only 0·1 per cent. of the share capital of a company but with genuine and honourable intentions of building up a much larger shareholding over the years as loans or savings become available to him. The Chief Secretary's reply, which I hope I paraphrase correctly, that if the taxpayer would only be patient all would be well when he had achieved his 5 per cent. missed the point. The tax relief is far more important in the ordinary run of cases to

the working shareholder in the early stages of his career as a shareholder. In many companies, by the time the shareholder has achieved 5 per cent. he may even be able to laugh off the burden which the Government are imposing on interest payers generally. It is most unfair to knock these people down in the early stages of their acquisition.
This should he particularly abhorrent to hon. Members opposite, because their political philosophy, I believe, starts, as does mine and that of my right hon. and hon. Friends, from the basic proposition that Britain industrialised itself on the tragic basis of gross inequality of wealth at the time when we started industrialising. This down the generations has multiplied and given us a scandalously unequal society. It would be out of order to discuss them, but there are many ways in which this scandalous: inequality can gradually be put right. Cannot the Government concede that in a highly dangerous and unequal society one very practical way of putting some of that inequality right is to encourage people to borrow to acquire wealth?
One way of making up for the inequalities of past generations is when firms with at any rate a certain amount of altruism encouraged some of their employees to borrow, often on reasonable terms, to acquire a stake in that company and, if they are lucky, to increase the degree of equality of wealth, at any rate inside a particular corporation. On that ground alone, of reducing the tragic inequalities in the commercial side of our society, I should have thought that the Government would have adopted the more broadminded approach.

Mr. William Baxter (West Stirling-shire): I hesitate to enter into this debate because I recognise, having listened to some of the speeches, that there are present considerable experts on the question of taxation and the interpretation of the various provisions pertaining to our tax system; and I start from the additional disadvantage of not having served on the Standing Committee which considered the Bill.
I want to support the point of view which has been expressed by the hon. Member for Colne Valley (Mr. Richard Wainwright) and by my hon. Friend the


Member for Ashton-under-Lyne (Mr. Sheldon) that the whole system of taxation, especially that pertaining to close companies, is very complicated. The Government have been asked why they pick on 5 per cent. The average man—I take myself to be an average man—will find great difficulty in seeing where the 5 per cent. comes in, because we have not even had time to study the whole implications of the Clause and the various relevant Measures. The application of 5 per cent. over the board is in itself a great inequality, because it is based upon different sets of circumstances. To a close company with a small capital and small profits it means little but to the larger company it may well mean a great amount.
In Scotland recently, the Economic Planning Council set up a special subcommittee to investigate why people were not starting businesses, why young men and women were not prepared to start businesses. The curve of the graph is gradually falling, and few people are prepared to start new businesses now. The reason can be found in the taxation system imposed upon them. The great wealth of our nation, the vitality of our nation, did not come from the large oaks but gradually grew from the small acorns. If we stultify the starting or developing of small businesses, we stultify the fundamental growth of our nation.
I am interested in several businesses, one of them a small painting contractor's business. Last year, the inspector of taxes made us disburse £2,000 and more of profit to the directors, my wife and me. That money was going into the development of the business, but the inspector of taxes thought that the company should not be further developed. What qualifications he has to make such an assessment I am damned if I know. He never had a business and does not understand the problem in running a business.
Whether we are politically in favour of a better social order from one point of view or another, there must be a broad basis of agreement and understanding among sensible men and women that we must stimulate the growth of industry. The first and best way to stimulate that growth lies in our smaller industries. The Economic Planning Council need not look far to find the reasons why people are

reluctant to set up in business. There is no need for a special sub-committee in Scotland to ascertain the reason. The taxation system is too difficult. That is it. It is impossible for an ordinary man to understand the basis of taxation, and this in itself is tantamount to a negation of good legislation.
My view, for what it is worth, is that there are too many academics not only in the Government but in the Opposition, too, people with too much power to put into operation theories and pet ideas which have no practical basis. When it comes to practical affairs, the ordinary man, the elementary schoolboy who has made a reasonable success in business, knows what is needed, but his view is of no consequence. He does not use phraseology which tickles the ear or whets the appetite of good conversation. He is just a plain simple man. But the plain simple men are the backbone of our nation in peace or war. If we do not give them a better incentive to build new industries from the foundations up, we ruin the nation's future.
I warn my right hon. Friend that there is no need to set up special committees in Scotland, England, Northern Ireland or Wales to find out why people are not starting new enterprises. The reasons are to be seen here in the Bill and the Notice Paper. One need not look further.
I apologise for intervening in the debate. I cannot fully appreciate all that is contained in the new Clauses because I am not a trained chartered accountant. But it is not trained chartered accountants who start our businesses, although chartered accountants have had a lot to do with running them in the past. My right hon. Friend would do better to heed my warning, and I warn the Opposition Front Bench in the same terms.

6.15 p.m.

Sir J. Foster: Let us imagine that three people are working hard in the conduct of business. Two of them are working—I use the words of the new Clause—
for the greater part of his time in the actual management or conduct of the business
of a close company. One of them borrows some money and acquires 5 per cent. in the business of the close company. He has his interest allowed. The other does not have enough money, cannot acquire 5 per cent., and so he is penalised. The


Labour Government say, "Down with him; he cannot have his interest allowed" If ordinary men in the country understood that, they would criticise the Labour Government for it. Why should not a man who has not enough money be allowed his interest and be able to build up his stake?
The third man works for a partnership. A partnership is sometimes little different from a close company. He borrows some money and buys 1/2 per cent. of the value of the partnership. He has his interest allowed. Why?—because we must benefit people who work for partnerships. Somehow or other, the name "close company" is regarded as a dirty word. They are family businesses. The right hon. Gentleman tried to distinguish between one and the other and said that it was not a term of art, but family businesses are partnerships, sole traders or close companies.
The result is ridiculous, and it is unfair. We on this side are just as much against unfairness as hon. Members opposite, but they want to arrogate to themselves the monopoly of spotting unfairness. We may sometimes disagree about what is unfair, but I believe that both sides are against what is not equitable.
There has been a good deal of talk about concessions. I hope that my Front Bench will not be too grateful to the right hon. Gentleman or talk too much about concessions. I can imagine the Prime Minister making his appeal at the next general election and saying, "The Labour Government made more concessions in four years than the Conservative Government did in 13 years". Why?—because the Labour Government put forward more untenable propositions of policy and they had to make more concessions. I can imagine the Prime Minister saying, "Just look at the number of times the Conservative Front Bench said that they were grateful for concessions. Vote for the Labour Party."
The hon. Member for West Stirlingshire (Mr. W. Baxter) spoke about the complexity of our tax laws. I ask him to look at the drafting of the new Clauses, referring first to new Clause 33, subsection (3). If a man borrows to buy 5 per cent., then, while the loan is in progress and he pays interest, he is allowed the interest

taking the period from the application of the proceeds of the loan until the interest was paid as a whole".
In the first place, that is bad English. It is not the interest which is "paid as a whole" but "taking the period as a whole". It is confusing to the layman and he wonders what "interest paid as a whole" is. A person in a close company has to work throughout the period taken as a whole. If he is in a partnership, on the other hand, different words apply and he must do it "throughout the period".
The lawyers will say that if different words are used in different places for more or less the same thing, there must be a serious financial and drafting reason, and "throughout the period" must be different from "taking the period as a whole". Why should we write that a person with 5 per cent. in a close company should take "the period as a whole" during which he must work, whereas the partner must do it "throughout the period "? Will the right hon. Gentleman explain why there is that difference in wording, and what the difference means? Will he apply his great acumen to explaining the reasons for the difference, or, perhaps, obtain help from those who are in a position to help him on it?
Under new Clause 33(7), the loan must be used within a reasonable time for the purposes of the Clause, and any loan the proceeds of which are applied to some other purpose before being applied to the real purpose should be disregarded. In other words, if one borrows £X and uses it for some other purpose before buying one's 5 per cent, it does not qualify.
These words are dangerous, because it seems to me that if one puts the money on deposit it is applied for some other purpose. The right hon. Gentleman assured me that that was not so, but I still do not see that. The words seem to exclude those who are perhaps more sophisticated about getting the highest amount of interest from making local government loans or buying gilt-edged stocks. When one borrows £X to buy one's 5 per cent. all the various legal formalities may have to be concluded but the lender may insist on the money being taken now, and it seems to me that the provision puts too much of a brake


on using the money properly in the meantime, because it could be said that it has been applied for some other purpose.
I would be grateful if the right hon. Gentleman could answer that point, explain the difference between "taking the period as a whole" and "throughout the period", and say why a partner can buy less than 5 per cent. whilst someone in a close company cannot.
What is the right hon. Gentleman's doctrine of proprietorship? He has adopted a proprietorship which seems to apply only in a close company, whilst for all practical purposes a partner is much more of a proprietor than a shareholder with 5 per cent. What has become of that 5 per cent. doctrine of proprietorship as applied to a partnership?

Sir E. Errington: It is my wish that consideration should be given to the staff of the Inland Revenue when we consider a Clause like the one before us. I am on an Estimates Sub-Committee on the administration of the Inland Revenue, that has not concluded its consideration, but it is clear that it is extremely difficult to obtain adequate staff for the Inland Revenue.
It is very difficult to understand new Clause 33. I am not at all certain that I do understand it. I assume that it is a matter that will have to be dealt with as on the shortfall basis by the inspectors of taxes with regard to the close company. Is it fair to introduce a complicated Clause of this character in such a way that every inspector of taxes may well have to consider the complex position?
The difficulties of the shortfall have already been indicated. The inspector must consider whether it is necessary to allow a certain portion of a shortfall in order to help the continuance and development of a close company. The Clause includes a number of difficult matters which, once again, the inspector will have to decide.
I do not think that that is the best way of dealing with these problems, generally speaking. It is possible that on a technical basis it might be possible, but where, for example, subsection (2)(c) of new Clause 33 says:
…if the whole, or substantially the whole, of its income is one or more of the following descriptions …

surely that is something that may be extremely difficult to arrive at? It may not even be possible to arrive at what is substantial.
In subsection (7) we find the provision:
…either on the occasion of its application, or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.
Those are just two examples of the difficulty that arises. I believe that generally the inspectors of the Inland Revenue are trying to do their best. The investigations of the Estimates Committee show that clearly. But the Government are imposing on them a degree of work and new legislation which may result in a breakdown. It is not possible to be perfectly simple in drafting income tax law, but I wonder whether the Government have given enough consideration to the situation that arises in the Inland Revenue, where there is a shortage of staff, particularly qualified staff, to deal with difficult problems like this.
It is no one's fault, but it was only this afternoon that we knew that the new Clause would come before us today and he discussed. It is not fair either to the House or to those who will have to work it on the ground. I do not agree with the suggestion that we should have a Select Committee to deal with questions that may arise before budgetary matters are decided. But much more careful consideration should be given by the Government to avoiding complexities, which mean bad administration if they are not easily explicable.

Mr. Kenneth Baker: The Chief Secretary enunciated another set of tax principles this afternoon, and I could not help recalling his speech on last year's Finance Act, when we were dealing with Section 15 on the aggregation of children's income, which he defended by a completely new principle, devised for the moment, of the family spending unit. This was rightly attacked by the Conservatives as the elevation of what is little more than party prejudice into principle. The principle he enunciated this afternoon is just as bad.
There is little doubt that Clause 18, which introduced a new principle into our tax laws, a fundamental change in our tax practice, has not been properly


thought out. It was followed by Clause 19, which allowed tax relief to continue on interest on loans for houses and improvements. In Committee substantial Amendments were moved which the Committee did not accept because of the even voting—which established the principles on which the whole operation would work. Now, as the Bill is about to become law, we have further substantial changes which, clearly, again have not been properly thought out.
The Chief Secretary has made two concessions this afternoon. One is for close companies and those who borrow to invest in close companies, like family businesses, and one is for partnerships. Why has he selected these two types of activity? The answer in respect of partnerships is obviously that we made a very good case in Committee. It was sympathetically received, because three of the Treasury Ministers are ex-professionals who were in partnerships, I believe, before entering the House, and they readily understood the arguments.
6.30 p.m.
Why has the close company been selected? Why should a director of such a company be given this privilege by a Socialist Government? It is an extraordinary anomaly, and it is clear to me that, the Government have not really sorted out their attitude to close companies. One year they encourage them, another year they discourage them. It is rather like Pavlov's dogs, who were trained always to come for their food when they heard a whistle and to crouch in fear when they heard a bell. Eventually hunger could be stimulated by sounding the whistle and fear by ringing the bell. Finally, Pavlov sent the dogs mad by blowing the whistle and beating them, and ringing the bell and giving them food. This is how the Government treat close companies—one year they are encouraged and another year they are positively discouraged.
This may sound ungrateful, because any support for close companies is to be welcomed, but I want to put the case for a group of people who have been completely omitted from these concessions and who are the most deserving. The partnership case has been conceded. Partnership cases and problems of partnerships are always well represented here because so many ex-partners are Mem-

bers of this House. Close company cases are well argued here because many Members on both sides are directors of close companies. The case which often goes by default is that of the young executive in business with no capital., working not for a close company but perhaps a medium-sized public or private company, trying to build up a stake in that company.
How do we motivate that sort of young person, my contemporaries? Many of my friends are in this situation, as I was. They used to be motivated before the 1966 Act by being allowed to purchase share options. This was disallowed by that Act, and then various companies introduced, with the complete approval of the Inland Revenue, various share purchase schemes which had to be approved by their directors. The mechanics were straightforward; companies were allowed to lend their younger executives and employees a certain amount of money, usually their annual salary. That money was invested in the shares of the company. It could not be used for speculation on the Stock Exchange, and these people usually had to pay the full rate of interest.
I should declare an interest, because I am still a member of one of those share purchase schemes. In future these schemes are out, because if a young executive has to pay interest on his loan he has to see his shares appreciate by at least 15 per cent. a year to cover the interest. This is a substantial appreciation year by year, and yet these are the sort of people whom both sides of the House generously accept we have to motivate, to keep in this country, and to give them an incentive to create personal wealth. But they are not protected or given any assistance by these Amendments.
Extraordinarily Clause 19 allows a person to borrow £500,000 to build a swimming pool in a garden and have the interest allowed, yet the young executive who borrows only £2,000 or £3,000 to buy a stake in his own business is penalised.
I turn now to the sophistry of the Chief Secretary. He tried to establish a principle that interest should be allowed on loans which d id not produce an income, hence the build-up of a stake in the partnership of close companies.


There are lots of other instances not covered. For example, there is money used to buy pictures, furniture or silver in the antique market. These do not produce income and, obviously, the Treasury will not allow interest on them.
Returning to the analogy of the close company, what happens when a close company goes public and the directors of the close company, under this Government Amendment, are allowed to borrow money to buy shares in the close company? Suppose that company is fledged on the Stock Exchange and becomes public, but remains a close company. There are thousands of these. Does the axe fall and does the Treasury say that all the directors and owners of close companies at that point, when they go public, shall have their interest disallowed?
This is the sort of inconsistency which we are led to by trying to establish a bogus principle. Obviously, these concessions are welcome but they do not help the most deserving section, the young executives. Ironically, these concessions accentuate the gap between the very rich, the directors of large close companies, who can now borrow thousands, indeed hundreds of thousands of pounds, if not millions, to invest in their own businesses, while the young executive who has no capital and is trying to create some, is prevented from doing so.
This is why I believe that Clauses 18 and 19 distinguish between our two parties. This is why I believe them to be the most important in the Bill. The attitude of hon. and right hon. Gentlemen opposite is one of restriction and clamping down, whereas we hope to use the tax system to promote the creation of wealth by giving incentives to the young and the deserving.

Mr. David Howell: As one who did not have the privilege of being a member of the Finance Bill Committee it would be churlish of me not to congratulate hon. and right hon. Members on both sides for the work that they did and for the way in which their efforts have borne fruit, although it has been very puffy and bloated fruit. The most remarkable word I have heard issue from the Chief Secretary's lips today came at the beginning of his opening speech when he called these Amendments "simple".

How he can describe this mass of wording which has to be spaded on to the Statute Book as "simple" passes my understanding.
His first point dealt with partnerships. It must be acknowledged that interest on borrowing for a partnership is to be deductible. This decision has been taken in a way which has given many hundreds of thousands of professional people a very nasty turn indeed. From Budget day until the day when this Amendment appeared it seemed as though the Government were proposing to strike at the very heart of the development of commerce and services of all kinds, doctors, general practitioners, "vets", and all kinds of partnerships in the law and among accountants.
It seemed that by this legislation, which came from out of the blue, the Government were determined to strike down these activities and put at a disadvantage everyone setting out on this kind of career in which they would progress towards these partnerships. As the hon. Member for Heywood and Royton (Mr. Barnett) said, this is not a happy way for a Government to go about bringing before the public such a measure and taking public views and reactions upon a major development.
This is the kind of thing where a Select Committee would have been useful or where the Government could have made good use of that valuable innovation, the Green Paper. That would have helped and saved many worries and much correspondence and a good deal of distraction by thousands of people who are constantly being urged by the Chancellor and the Government generally to work hard and concentrate on higher productivity. This was not a very clever way of going about it, but I suppose that we should at the least be thankful for the relief.
The next item dealt with the family business, the close company, and this new creature to be put on the Statute Book, "a working proprietor". Here we move from some degree of precision to pure surrealism in trying to describe what it is about which we are legislating. When we examine the concept of a working proprietor in the sense in which the Chief Secretary described him—he said that he need not be employed, 100 per cent. but possibly half time; the descriptions were very vague—or consider the working


partner who apparently suddenly becomes privileged when he has a 5 per cent. interest in the company but not before, we are dealing with obscure and meaningless definitions which, when interpreted in the courts and by Inland Revenue inspectors, will cause far more complexity than almost any other tax measure put on the Statute Book by the Government.
I agree that there is no cause to welcome such a bizarre selection of Amendments of such vast complexity creating so many new anomalies. They will cause many difficulties among people who have already been severely worried by the Government's attempts to legislate in their presentation of intentions when the Bill was first brought forward.
I come to the word to which so many Members have referred in discussing the first two massive Clauses—"complexity". It is clear to me from Written Answers which I have had from the Financial Secretary—I am sorry that he is not here today, and I hope that he is recovering from his illness—that the Government rushed into this Measure without carrying out any proper research and without knowledge of the administrative require-merits, administrative implications or costs of it. It is clear from the replies about the lack of information, even about the number of people applying for relief on Interest on overdrafts and loans for this kind of thing or any other activity, that the Government plunged into this legislation in their characteristic way without any understanding of the administration of what must be regarded as an integral part of their reforms. If the Government wish to introduce these highly complex reforms, let them work out the administration of them before they push the country and Civil Service, in this case the Inland Rvenue, into more impossible tasks.
As my hon. Friend the Member for Aldershot (Sir E. Errington) rightly said, that unanswered question hanging over this Clause—perhaps it will hang over many other Clauses and Amendments—is what administrative effect will it have. How will the burdens be sorted out? Who will do the work? How will the tax inspectors, who are already near the end of their tether in many respects, cope with the new complexities? If there is one epitaph which I should like to put on this Bill—

Mr. Speaker: Order. The hon. Gentleman can put his epitaph on the Bill at Third Reading. He can put an epitaph on the Clause.

Mr. Howell: If I may suggest a preliminary draft epitaph, it is fair to say that not since the time of the early Tudors has the tax administration of this country been in such chaos, nor have men had so little knowledge about how much they do or do not owe the State. The new Clause will head us not in the direction of more simplification of the tax system, which should be the keynote, but rapidly over the horizon in the opposite direction.

6.45 p.m.

Mr. A. P. Costain: I did not have the privilege of serving on the Standing Committee, but, with a tax expert, I have had the advantage of reading the OFFICIAL REPORT of the Clauses in which I was most interested. I had almost a tutorial on this subject. I congratulate my hon. Friends on the fine show which they put up in convincing the Chancellor of the Exchequer of the error of his ways. To say that he has granted concessions is quite absurd. It is like knocking down a man, breaking his leg and then being thanked for picking him up.
I am interested in the first new Clause to which I tabled an Amendment. I wish to declare an interest, because I am a director of a public company. I am a director of a close company. Both are in the same type of business. In both companies, because of the present tax system, we face a very serious problem in deciding how we can encourage young executives and leading craftsmen to take a real interest in the company and not join the brain drain. One of the greatest problems of my group throughout the world is to persuade senior and first-class men with initiative to stay in this country because there are so many tax advantages if they work for a company overseas. Hon. Members who have studied some of the recent issues which my group has put out will know that we have been able to encourage top level people to stay in the group but not in this country.
When I think of the difference between a public company and a close company, and when I relate Tom Smith in one with Bill Jones in the other, the situation does


not make sense. Both are anxious to become top executives. They are anxious to obtain some benefit from their skill and enthusiasm. They want to buy shares in their company, and, because it is impossible, with present taxation, to make any savings and bring up a family at the same time, the only way in which they can buy shares in their company is to borrow money to pay for them. The dividends which they receive from the shares are set off against the interest on the money they borrow. As long as an individual has to nay tax on his dividends, he has not the opportunity even to pay the interest on the loan, let alone pay back any of the capital. Under the Clause a member of a group which is a public company has not a chance. For some reason, the Government have decided that people who work for large firms should not own shares in their company and should not take an interest in their company and they have ensured that they are taxed in such a way that they never can. This is absurd.
The individual in a close company, provided it is small enough, has the chance of buying a 5 per cent. interest. People who work for small close companies are not always ambitious individuals who want to take an interest in their companies. Unless they are able to buy a 5 per cent. holding they have the tremendous disadvantage that they cannot offset the interest.
My taxation advisers and myself have been following the debates on the Bill and we have almost had a bet on how the Government would get out of their present predicament. We predicted that they would propose the worst of all possible worlds, and that they have done. It is not a difficult thing to bet on; they do the same thing so often. It is absurd that a man can have interest allowed only if he is rich enough.
This is not merely a question of taxation, but of how we can retain top executives in this country. This is what the country needs. If matters go on as they are doing, the situation will go from bad to worse.
I have put my name to an Amendment put forward by my hon. Friend the Member for Crosby (Mr. Graham Page). Any Amendment put down by him is always faultless. I have never

known the Government to try to catch him out on the wording, and, since they cannot do that, they have tried another trick. They say that they could never agree to 60 per cent. and that it should be more.
I know from practical experience how often at board meetings we have to go into a sub-committee to discuss taxation, and how much time is wasted in talking about the effects of taxation. I know that if I come to my hobby horse of S.E.T. I shall be ruled out of order, so I will refrain from doing so, as it would be too much for your patience, Mr. Speaker. Why it takes so long in industry to work out the taxation position and why it is necessary to consult so many learned experts is because the legislation is so badly drawn up that nobody can understand it, not even the Departments.
The Amendment makes clear what is meant by "substantially the whole". Where a company by doing certain acts gets tax relief, it will be no surprise to the Chancellor to hear that the board of that company goes to incredible trouble to see that the company does not step out of form and so lose the taxation relief. My hon. Friend the Member for Crosby made the point that a trading company which received substantially the whole of its income from overseas should have liquid reserves. It is to the benefit of the Chancellor and of local authorities that those liquid reserves are put on short-term loan to local authorities, as they are in a well-organised company. Goodness knows, the local authorities want it.
The Chief Secretary made confusion more confounded when he said that he wanted more than 60 per cent. This will put every board in confusion; they will not know what he means by that. Surely it is not beyond the wit of man and beyond the intelligence of the Treasury to insert a simple figure, as was done in the legislation dealing with building societies. Why will he not say what he means?
If Mr. Speaker would accept a manuscript Amendment, I am sure that my hon. Friend would be prepared to do a bit of horse-trading on the 60 per cent., but it is essential that a figure should be specified. The Government have an opportunity here to encourage top executives. If they do not take it there will be


another year with a bigger brain drain and it will take that much longer for the Conservatives to put matters right.

Mr. Stanley R. McMaster: My colleagues on this side have laid emphasis on the brain drain, but I would like to ask the Chief Secretary about another aspect of the Amendment which concerns the very arbitrary 5 per cent. If a young executive takes an interest of less than 5 per cent. in a close company, why when he is borrowing money at the high current rates should he be excluded from the provisions of the Amendment?
There are many different types of close company. Some are professional partnerships with a small capital and others, particularly the merchant banks in the City of London, have very substantial capital, and one could not expect a young executive to raise enough money to invest more than 5 per cent. in such a company.
As was shown during Question Time today, close companies contribute to our invisible earnings and to the overseas trade balance of the country, and if it is the purpose of the Government to encourage executives working in such companies to take a share in the risk in the company and so to further the interests of the country, those executives should surely be entitled to offset the interest on their overdraft against any earnings from their investment in the company. The executives are taking a substantial risk. Not only do their job and their livelihood depend on the company but also their capital. If the company should fail, the man loses not only his job and income but also his savings, and may even have to mortgage the future.
The figure of 5 per cent. is arbitrary and meaningless and should be abandoned. If it is the purpose of the Chancellor to encourage young executives to take an interest in their companies and so to create flexible companies rather than large established companies in which the executive is almost prevented from taking an interest and where the partners are growing older, taking less interest and dying, the young executives should be given every encouragement to take even a 1 per cent. or a 2 per cent. interest and to borrow money for this purpose.
I hope that the Chancellor of the Exchequer or the Chief Secretary will deal

more fully with this point and will explain why, when the 5 per cent. might be a matter of a few thousand £s, tens of thousands of £s or, in the case of merchant banks over £100,000, a young executive investing less than 5 per cent. should not obtain the advantage proposed in the Amendment.

7.0 p.m.

Mr. Iain Macleod: On a point of order. We asked, Mr. Speaker, whether you would allow a separate Division if a particular request was made. Naturally, these two Clauses are in principle agreeable to us. Much of the criticism has centred on Amendment (k) on page 6717, in the name of my hon. Friend the Member for St. Ives (Mr. Nott), in line 20, to leave out the word "material". It has the effect of removing the minimum of 5 per cent. from new Clause 33. For the convenience of the House, would you agree to call Amendment (k) for a separate Division?

Mr. Speaker: I have the sense of the debate. The right hon. Gentleman has made a fair request. I will allow a Division on Amendment (k). It will take place after the Second Reading of the Clause.

Mr. Temple: Some weeks ago I rang my accountant to ask him whether he would care to express an opinion on this disallowance of loan interest. He is a wise man, and he said, "Not until the Finance Bill is finalised". But I do not think that even my accountant thought that close companies would be put into a special category. My hon. Friend the Member for Acton (Mr. Kenneth Baker) asked why close companies had been picked out—was it because they were small or had some special status? It was neither of those things.
I put a couple of points to the Chief Secretary which are quite new in this debate. In former years the Chief Secretary was an accountant—he is still, of course, an accountant, although not practising—and no doubt in his time he has signed a balance sheet certifying that a certain company is a close company. One does not know the status of a company until long after the year has finished and it has been determined to what extent controlling shareholders have controlling interests.
I make this point quite seriously to the Chancellor of the Exchequer. For the purposes of encouraging young executives, who will be allowed loan interest only so long as they take up shares in a close company and so long as they have over 5 per cent. of the shareholding, the controlling shareholders of certain companies may think, "We must retain the close company status because if we become a public company this practice will not be permitted to continue". I do not know whether I am wrong; the Clause is extremely complicated, but this is how I read it.
Reference has already been made to the complexities of the legislation. In business today the advice of the accountant is probably the most important advice a company receives. If a company wishes to encourage junior executives, it has to devise some kind of financial structure to fit the particular criteria laid down in the new Clause. To take as an example a large close company in which a 5 per cent. interest would comprise a substantial interest, without changing the underlying status of the company or companies structure an up-and-coming executive could not normally acquire a 5 per cent. interest because the sum he would require to pay would be too large. So what would happen? There would probably be a meeting with accountants and advisers to devise a complicated structure of underlying close companies in which the executive would work. All that would bring the particular close company within the ambit of this Clause and within the scope of the financial status of the executive whom the company wanted to encourage.
Is it worth all the trouble of devising a Clause which is entirely directed to close companies? Why not enable the Clause to be directed equally to limited or unlimited companies? I believe I am the only hon. Member who has spoken about unlimited company status. In the world in which I move, the comparatively small company world, a number of people at the moment are changing their companies from close companies to unlimited companies. They are getting away from what are termed the shackles of the close company status, but on this basis they will not have the advantage of bringing in their executives.

I put this forward as a serious point, and I hope that the Chief Secretary will be able to give us an answer.

Mr. Diamond: When the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) spoke on the Clause, he was good enough, in his usual gracious manner, to express appreciation for the way in which in Committee we had listened to the arguments put forward from both sides and had attempted to meet them, as far as we could, within the philosophy of the new scheme. He said that he thought it was unique. I share that view. It is a tribute to the fact that the procedure was devoted more to persuading a Government who were willing to listen to argument than to wearing down a Government who were unwilling to be worn down. To the extent that the procedure has worked well, I, too, am pleased. I feel that it was an improvement in our democratic procedure.
The right hon. Member's expression of appreciation was echoed, in perhaps less persuasive terms, by other hon. Members. But then we began to find ourselves in the difficulty that the argument was increasingly put forward that, although we had been willing to listen to the arguments and to put forward proposals such as the two new Clauses which we are now considering and which met a great deal of the argument put forward, we were, by so doing, rendering the situation more anomalous than it was previously and were departing from the strict logic of the original proposals.
We were to a certain extent, in relation to close corporations, departing only from the strict logic of the original proposals. My recollection may be at fault, but I do not recollect a single speech in Committee that these kinds of proposals were being urged to suggest that, if we acceded to these pressures, we should be departing from the logic of the case and should be creating increasing anomalies.
I am aware of arguments which are now being put forward that we should make further concessions to render the Bill even more anomalous so that hon. Members opposite could make the point with some justification which they cannot at the moment make—

Mr. Temple: rose—

Mr. Diamond: It would be more convenient if I could get on with my speech.

Mr. Temple: The right hon. Gentleman is now alleging that all these various arguments were not put forward in Committee. I would remind him that in this particular instance it was a unique Finance Bill Committee in that it was a very small Committee indeed. All other Finance Bills have been taken either in Committee of the House or in a very large Standing Committee. Therefore, it is possible that many of the arguments which have been adduced today were not put in Committee.

Mr. Diamond: I was not making that point and, though I would agree that it was a select Committee, it was selected in a rather different way from that which the hon. Gentleman suggested.
I have been asked what is the cost of the new proposals. I shall attempt to deal with the question, although it is never very easy to give precise figures. Before dealing with it, however, the one point which has arisen time and time again is the financial cost. What has been totally omitted and what was the main argument put forward when the Chancellor announced these proposals is the demand effect, which was expected to be considerable. That was a major argument in the proposals, and we see no reason to change our views about that aspect. The indications available to the House seem to be that the proposals which we have made have registered in the minds of the borrowing public.
I turn, then, to deal with the cost. It is not possible to answer with precision the questions which have been put to me about cost. It would be wiser not to give a figure. Instead, I will give an indication of the scale. I hope that I shall help the House if I say that, broadly, the proposals which we are putting forward in relation to estate duty, partnerships and close corporations—I do not include the proposals in relation to the five-year extension of commitments—would cost of the order of £3 million, approximately half of it to the estate duty proposals and half to the partnership and close corporation proposals.
My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) asked me if I could split that figure in relation to surtax. I am afraid that I could not.

It would be extremely small. My hon. Friend talked about surtax payers contributing £5 million. However, the £5 million of the £25 million total was in relation to surtax and not necessarily to surtax payers. I am sure that my hon. Friend recognises the difference. That is why it is smaller that he might otherwise have thought. I am sorry if I did not make that distinction sufficiently clear on an earlier occasion.
I turn now to the generality of the complaint rather than the reception which one always expects when one meets pressures which are made in Committee. I have detected practically no criticism on the proposals relating to partnership. The criticisms are related almost exclusively to the extension of the proposals to close corporations, in particular to the definition of the working proprietor in the close corporation as being one owning 5 per cent. or more.
I recognise that there is an enormous amount to digest in these proposals. It is very difficult to have new proposals of this magnitude put forward at short notice. In trying to meet the convenience of the House, we could not carry out our responsibilities fully having regard to the timetable and the wishes of hon. Members generally not to spend the whole of August attending to their duties in this House. There has been an enormous amount to digest, and perhaps it will be convenient if I go over the argument which I put forward a little earlier.
7.15 p.m.
I do not recognise a departure from principle. There is only one principle in the whole issue. It is what is business interest and what is private interest. A business interest is readily recognised in the case of a single proprietor or sole trader. To move from a sole trader to a partnership is an obvious next step. Although by far the majority of partnerships borrow money for their business purposes as partnerships, occasionally an individual partner may wish to borrow for perfectly good reasons. I gather that the House does not dissent from the view that, if one is to have a regime of this kind, it is sensible to extend the principle to an individual partner providing capital for the partnership by borrowing and to give relief on the loan interest for tax purposes.
I have started with those areas where the House is broadly in agreement. I come now to the area where there is a measure of disagreement, and I turn to what I regard as a reliable authority in this House, the hon. and learned Member for Northwich (Sir J. Foster). He said in a most helpful speech that, when talking about a family business, it is impossible to distinguish between a sole trader, a partnership and a close corporation, and he added that a family business will take on one of those three forms. I agree. It does.
I agree with those who say that the logic of the case is not as solid as it was or would have been if we had stuck to the sole trader or the partnership. In an attempt to meet what I regard as the common sense of the proposals put forward in Committee, I have moved deliberately to saying that one cannot distinguish between the sole trader, the partnership and the close corporation in the case of a family business and that, therefore, it would be right and sensible to include the working proprietor who decides to run his business under the structure of a sole trader, of a partnership or of a close corporation.
In all cases, there is essentially the element of a very close integration between ownership and management. That is what a close corporation really means. It is distinguished from a non-close corporation where management and ownership are broadly distinct. Therefore, I thought it right to bring forward proposals based on the common sense extension of the principle, or what the hon. Member for St. Ives (Mr. Nott) called the
easing of the rigidity of the scheme
as originally proposed.
I have repeated this argument so as to distinguish it from the case of those who put forward an entirely different principle that we should seek to assist and to prefer in relation to other taxpayers those young executives in companies of all kinds who, it is thought, should be enabled to acquire a stake, essentially small to begin with, in their companies and should be given some tax advantage which is not open to other taxpayers in order to encourage them to achieve that end.
That is not the point with which I am dealing, and it is not claimed that we are preferring them. They have not been preferred previously, and they are not being preferred now. I am dealing with a simple extension of the business interest concept, and that is the reason why we come to some little difficulty in trying to associate that concept with a close corporation and work within the rules of a close corporation, which is, after all, a corporate body. Therefore, we have to find appropriate rules for defining the working proprietor in a close corporation.
No matter what figure is chosen, someone can easily make a speech saying, "How ridiculous it is to have a certain figure qualifying and half per cent. below that non-qualifying". I dare say that I could scratch my brain and recollect an occasion, when in Opposition, on which I have fallen into this error. It is easy to make that kind of speech, but we all know in our serious moments that we must have some kind of definition.
I have listened to five speeches insisting that there should be a closer definition of the 60 per cent. dealt with in the Amendment in the name of the hon. Member for Crosby (Mr. Graham Page). We must have some kind of definition so that people know where they stand. The definition that we have taken is that which is hallowed by the authority of this House by Governments of both parties over the years.
It is no use the right hon. Member for Enfield, West shaking his head. His recollection cannot be worse than mine. I remember the number of most acceptable speeches that he made. He put all my courtesy to shame. However, one would not believe it listening to him now. He is the most courteous person in this House, and can make one feel that whatever one says is wrong. The right hon. Gentleman was Financial Secretary and Economic Secretary in the Government which supported these proposals, so he should not shake his head in a negative way he should be shaking it up and down. We have, therefore, adopted a very well-known rule, which goes back to excess profits tax, to profits tax and to corporation tax, namely, the rule of 5 per cent.
No one has said that if we are to have a percentage we could do better.


Many hon. Members have said that a percentage by itself is not a good criterion. Therefore, what is being suggested, although it is implicit rather than explicit, is that we should have a double definition, both a percentage and an absolute figure, for the reason that a small percentage in a large firm is a large amount and a small percentage in a small firm is a small amount.
These arguments have been gone over. There is no reason why we should not consider how these proposals work out in the course of the coming year to see whether we want to make the matter even more complicated—I repeat, even more complicated—because most of the pressures are to make proposals more complex to fit so many different individuals with more precision. There is no reason why we should not see how these proposals work out and how essential it is to have a double definition. I do not rule out the possibility of examining it in the coming year. But if we are to have a definition, I think that it had better be the one which has been accepted by both parties for so long.

Sir J. Foster: The right hon. Gentleman is always intellectually honest. However, he has not met the argument that there is no need for a percentage in this context. We have proposed that if a man works whole-time for a company he should be able to get a loan and have the interest deducted on any percentage. There is no need for double definition.

Mr. Diamond: I always respect and listen carefully to what the hon. and learned Gentleman says, but I find it difficult to contemplate any definition of a working proprietor which does not define, even in a minimum way, his proprietorship. That is what we are basing our case on and that is what we are moving from in the case of the sole trader and the partnership. I do not think that we should ever be able to do without a definition of that kind.

Mr. Costain: Is not the important thing the percentage of the individual's holding in a company? If the right hon. Gentleman wants to stop a portfolio investment—that is what he is really after —is it not better to say that, provided the man has a greater percentage on

portfolio in the firm that he is working for, he should be a proprietor?

Mr. Diamond: No. In terms of the other aspects of this new proposal about withdrawing relief from interest on borrowings, we have decided not to give relief to those who borrow to speculate or to invest in a general way. Real saving consists of saving money and using it, when accumulated, for investment or buying shares in smaller amounts. To borrow to invest in equal amounts can hardly be called saving at that point of time.
Without going over all the arguments again, it will be realised that I find it difficult to depart from the logical extension of the case of the sole proprietor to one who has a combined substantial proprietorial and managing interest in a close corporation. That is the proposal in the Bill. That is the reason why I find it impossible to accept the Amendments that have been put forward, particularly the Amendment singled out by the right hon. Gentleman because of its importance.

Mr. Kenneth Baker: Will the right hon. Gentleman answer the question which I and other hon. Members raised where a director has 10 per cent. or more of the interest in a close company which is quoted on the Stock Exchange and a lot of money is involved, but which remains a close company? Is that director, who may have borrowed a lot of money for his 10 per cent., still allowed to offset the interest on the loan against his income? If so, how does he differ from an ordinary shareholder who is not so allowed?

Mr. Diamond: If it is a close corporation the relief will apply. If it ceases to be a close corporation the relief will cease to apply.
The hon. Member for Acton (Mr. Kenneth Baker) made a very persuasive speech. He tried to persuade me that I should not extend the principle applied to sole proprietors and partnerships to close corporations. If we are right to do so in a nonsensical way, to do so in a way which is lacking in rigidity and in a way which is helpful in meeting the main arguments which were put, I hope that the House will feel—

Mr. Barnett: My right hon. Friend has not answered the main point. I


accept that he was right to treat close companies or, to use his new phrase, close corporations, in the same way as partnerships and individual traders. But why is it not sufficient to have it without the 5 per cent?

Mr. Diamond: I will try again, because I am anxious to get the wholehearted and full-throated support of my hon. Friends on all occasions. A proprietor must have a stake in the business or he would not be a proprietor. The question, therefore, if we are to have a percentage, is what it should be—[Interruption.] If we do not have a percentage, we have an amount. But it is convenient to deal with it by way of percentage. Other Governments have found that. If we are to have an amount it is better for it to be expressed as a percentage because a percentage is related to the concept of a close company. A close company is based and defined by adding up the percentage of the shares which the various members have. A close company is under the control of a small number of individuals—five or less—and the calculation is made by counting the number of shares and seeing what the percentage is. That is what constitutes control. I therefore explain why it is necessary, if we are to have a proprietorial concept at all, that it had better be in the form of a percentage. If it is to be a percentage of the amount, what can we have smaller than 5 per cent.?

7.30 p.m.

Mr. Barnett: Four per cent.

Mr. Diamond: But then, one has nothing to support the 4 per cent. My hon. Friend will realise that the figure of 5 per cent. is a figure which has worked, which has support and legal interpretation, and I think that it is the natural figure to be adopted in present circumstances.

Mr. Graham Page: Is the right hon. Gentleman going to say nothing about the phrase "substantially the whole" and about the close company with overseas subsidiaries?

Mr. Diamond: I apologise to the hon. Gentleman for the fact that I did not deal with those two points. On the phrase "substantially the whole", he disclosed

that he has an interest in a company and that he is interested in whether 60 per cent. would get by. I have answered in clear terms that 60 per cent. would not get by—

Mr. Graham Page: What would?

Mr. Diamond: As his hon. Friend says, if the board knew what would get by, the board would take steps to see that it complied with what would get by—[Interruption.] I am only quoting his hon. Friend. Therefore, to help the hon. Gentleman, I will be as precise as I can. But it is clear that words of mine, as he knows better than anyone else, have no effect on interpreting the law in the courts. However, so far as the administration is concerned, the Revenue would not regard 60 per cent. as satisfactory. It would regard a figure well in excess of 75 per cent. as satisfactory, having regard to all the other circumstances.
The hon. Gentleman made it clear from the description which he gave that there are different circumstances applying to different companies and to the same company at different times of the year. It may be clear that there would be investments of liquid resources which would vary from time to time. So the hon. Gentleman realises that it would be impossible to lay down a precise figure. Above that, no matter how it changes during the year, a company qualifies, and below that, it does not. The sensible thing is to adopt words which have been interpreted, which are the words in the Clause.
The hon. Gentleman's second question was, why do we not give the relief to cornpanies which are not wholly resident in the United Kingdom and not wholly subject to United Kingdom tax? We do not do that in respect of any part of the income tax laws, as he knows from all the arguments in which he has taken part. One can control the situation only where all the profits are subject to United Kingdom tax, and where part are not in the group, one cannot take them into account.
Secondly, where there is a subsidiary or sub-subsidiary, which is partly investment and partly rents, property, it is impossible to say with regard to a remittance from that subsidiary to its parent what the nature of that remittance is—whether it is one or the other or part of each. Therefore, the distinction which he seeks to make is just impracticable. It is for those


reasons that the Amendments which the hon. Member has put forward, I regret, are not acceptable.

Mr. Higgins: My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has already said that we are glad that the new Clause has been brought forward. There has been some discussion whether this should be termed a concession by the Government. It should be regarded both as a victory for the Opposition and, more particularly, as a victory for common sense.
But I cannot go along with the Chief Secretary's view that he is now departing slightly from the strict logic of his proposals, because his proposals had virtually no logic about them in the first place. He said that we did not dispute this in Committee; yet in col. 351 I said quite clearly that his proposals were grossly unfair. He said that there was nothing that one could do to prevent it, although he has tried to do so in the new Clause. I went on:
In fact, there is something one can do to prevent it. One can throw out the whole Clause."—[OFFICIAI, REPORT, Standing Committee F, 18th June, 1969; c. 351.]
Although we concede that the Government's proposals in the new Clause do something to rectify the initial position which they created, which can best be described as the incomprehensible concealing the indefensible, they still do not go far enough. The Government's initial proposal, which the Chancellor put forward in his Budget speech, was a typical shotgun measure, battering the whole target to hit one particular case to which the Chancellor objected, and what we are engaged in now is picking out the pellets from one or two people who the Chancellor feels would suffer particularly badly as a result of his initial widespread attack across the whole field of activity.

Therefore, the point of principle which has been isolated today is not the Chief Secretary's sudden conversion from drawing the line where he says that it has always been drawn—now in a totally different place—but this sacred concept, which he has thought up between Committee and Report, of a 5 per cent. interest in close company. The Chief Secretary says that there has been general agreement on this 5 per cent. But that is for totally different purposes than the purposes for which he is now using it. He is trying to achieve a reduction in borrowing, but if he sets a limit of 5 per cent., there will be a considerable incentive for many people with an interest in a company of somewhat less than 5 per cent. not to borrow less but actually to borrow more.

Therefore, it is clear that the Chief Secretary should not have sought to sit on this very fine dividing line, which, like the earlier ones which he sought to define, is quite indefensible. He should go back and give up the whole proposal in the Budget speech, because it cannot be reconciled either in logic or in equity. Therefore, I hope that my hon. Friend the Member for St. Ives (Mr. Nott) will move his Amendment to the new Clause, on which we might have a separate Division. While we appreciate that new Clause as such, we hope that my hon. Friend's Amendment will be carried.

Question put and agreed to.

Clause read a Second time.

Amendment proposed to the proposed Clause: in line 20, leave out 'material'. —[Mr. Nott.]

Question put, That the Amendment be made.

The House divided: Ayes 187, Noes 241.

Division No. 328.]
AYES
[7.38 p.m.


Alison, Michael (Barkston Ash)
Biggs-Davison, John
Channon, H. P. G.


Allason, James (Hemel Hempstead)
Birch, Rt. Hn. Nigel
Chichester-Clark, R.


Amery, Rt. Hn. Julian
Black, Sir Cyril
Clark, Henry


Astor, John
Body, Richard
Clegg, Walter


Atkins, Humphrey (M't'n &amp; M'd'n)
Boyle, Rt. Hn. Sir Edward
Cooke, Robert


Awdry, Daniel
Brinton, Sir Tatton
Cooper-Key, Sir Neill


Baker, Kenneth (Acton)
Brown, Sir Edward (Bath)
Cordle, John


Baker, W. H. K. (Banff)
Bruce-Gardyne, J.
Costain, A. P.


Batsford, Brian
Bryan, Paul
Crouch, David


Beamish, Col. Sir Tufton
Buchanan-Smith, Alick (Angus,N&amp;M)
Cunningham, Sir Knox


Bell, Ronald
Buck, Antony (Colchester)
Currie, G. B. H.


Bennett, Sir Frederic (Torquay)
Bullus, Sir Eric
Dalkeith, Earl of


Berry, Hn. Anthony
Campbell, B. (Oldham, W )
Dance, James


Bessell, Peter
Campbell, Gordon (Moray &amp; Nairn)
Davidson, James (Aberdeetishire, W.)


Biffen, John
Carr, Rt. Hn. Robert
d'Avigdor-Goldsmid, Sir Henry




Deedes, Rt. Hn. W. F. (Ashford)
Kirk, Peter
Rawlinson, Rt. Hn. Sir Peter


Digby, Simon Wingfield
Kitson, Timothy
Rees-Davies, W. R.


Dodds-Parker, Douglas
Lambton, Viscount
Renton, Rt. Hn, Sir David


Doughty, Charles
Lancaster, Col. C. G.
Rhys Williams, Sir Brandon


du Cann, Rt. Hn. Edward
Legge-Bourke, Sir Harry
Rossi, Hugh (Hornsey)


Elliot, Capt. Walter (Carshalton)
Lewis, Kenneth (Rutland)
Russell, Sir Ronald


Errington, Sir Eric
Lubbock, Eric
St. John-Stevas, Norman


Eyre, Reginald
McAdden, Sir Stephen
Scott, Nicholas


Farr, John
MacArthur, Ian
Scott-Hopkins, James


Fisher, Nigel
Mackenzie, Alasdair (Ross&amp;Crom'ty
Sharples, Richard


Fletcher-Cooke, Charles
Maclean, Sir Fitzroy
Shaw, Michael (Sc'b'gh &amp; Whitby)


Fortescue, Tim
Macleod, Rt. Hn. Iain
Silvester, Frederick


Foster, Sir John
McMaster, Stanley
Sinclair, Sir George


Fraser, Rt.Hn.Hugh(St'fford &amp; Stone]
McNair-Wilson, Michael
Smith, Dudley (W'wick &amp; L'mington)


Gilmour, Sir John (Fife, E.)
McNair-Wilson, Patrick (NewForest)
Smith, John (London &amp; W'minster)


Glover, Sir Douglas
Maginnis, John E.
Speed, Keith


Glyn, Sir Richard
Marples, Rt. Hn. Ernest
Stainton, Keith


Godber, Rt. Hn. J. B.
Marten, Neil
Steel, David (Roxburgh)


Goodhart, Philip
Maude, Angus
Stodart, Anthony


Goodhew, Victor
Maxwell-Hyslop, R. J.
Stoddart-Scott, Col. Sir M.


Gower, Raymond
Mills, Peter (Torrington)
Tapsell, Peter


Grimond, Rt. Hn. J.
Mills, Stratton (Belfast, N.)
Taylor, Edward M.(G'gow,Cathcart)


Gurden, Harold
Montgomery, Fergus
Temple, John M.


Hall-Davis, A. G. F.
More, Jasper
Thatcher, Mrs. Margaret


Hamilton, Michael (Salisbury)
Morrison, Charles (Devizes)
Tilney, John


Harris, Frederic (Croydon, N.W.)
Mott-Radclyffe, Sir Charles
Turton, Rt. Hn. R. H.


Harris, Reader (Heston)
Munro-Lucas-Tooth, Sir Hugh
van Straubenzee, W. R.


Harrison, Brian (Maldon)
Murton, Oscar
Vickers, Dame Joan


Harvie Anderson, Miss
Nabarro, Sir Gerald
Waddington, David


Hawkins, Paul
Noble, Rt. Hn. Michael
Wainwright, Richard (Colne Valley)


Hay, John
Nott, John
Walker, Peter (Worcester)


Heald, Rt. Hn. Sir Lionel
Onslow, Cranley
Walker-Smith, Rt. Hn. Sir Derek


Heseltine, Michael
Orr, Capt. L P. S.
Ward, Dame Irene


Higgins, Terence L.
Osborne, Sir Cyril (Louth)
Wells, John (Maidstone)


Hiley, Joseph
Page, Graham (Crosby)
Whitelaw, Rt. Hn. William


Hill, J. E. B.
Page, John (Harrow, W.)
Wiggin, A. W.


Holland, Philip
Pardoe, John
Williams, Donald (Dudley)


Hordern, Peter
Pearson, Sir Frank (Clitheroe)
Wilson, Geoffrey (Truro)


Hornby, Richard
Peel, John
Wolrige-Gordon, Patrick


Howell, David (Guildford)
Percival, Ian
Wood, Rt. Hn. Richard


Hunt, John
Pike, Miss Mervyn
Woodnutt, Mark


Hutchison, Michael Clark
Pink, R. Bonner
Worsley, Marcus


Iremonger, T. L.
Pounder, Rafton
Wylie, N. R.


Jenkin, Patrick (Woodford)
Powell, Rt. Hn. J. Enoch
Younger, Hn. George


Jopling, Michael
Price, David (Eastleigh)
TELLERS FOR THE AYES:


Joseph, Rt. Hn. Sir Keith
Prior, J, M. L.
Mr. Anthony Grant and Mr. Hector Monro.


Kerby, Capt. Henry
Pym, Francis



Kershaw, Anthony
Quennell, Miss J. M.



King, Evelyn (Dorset, S.)
Ramsden, Rt. Hn. James





NOES


Abse, Leo
Chapman, Donald
Ensor, David


Albu, Austen
Concannon, J. D.
Evans, Fred (Caerphilly)


Allaun, Frank (Salford, E.)
Conlan, Bernard
Faulds, Andrew


Alldritt, Walter
Craddock, George (Bradford, S.)
Fernyhough, E.


Anderson, Donald
Crawshaw, Richard
Finch, Harold


Armstrong, Ernest
Crosland, Rt. Hn. Anthony
Fitch, Alan (Wigan)


Ashton, Joe (Bassetlaw)
Crossman, Rt. Hn. Richard
Fletcher,Rt.Hn.Sir Eric(Islington,E.)


Atkins, Ronald (Preston, N.)
Dalyell, Tam
Fletcher, Raymond (Ilkeston)


Bacon, Rt. Hn. Alice
Darling, Rt. Hn. George
Fletcher, Ted (Darlington)


Baxter, William
Davies, G. Elfed (Rhondda, E.)
Foley, Maurice


Beaney, Alan
Davies, Dr. Ernest (Stretford)
Foot, Michael (Ebbw Vale)


Bence, Cyril
Davies, Rt. Hn. Harold (Leek)
Forrester, John


Benn, Rt. Hn. Anthony Wedgwood
Davies, Ifor (Gower)
Fowler, Gerry


Bidwell, Sydney
de Freitas, Rt. Hn. Sir Geoffrey
Fraser, John (Norwood)


Bishop, E. S.
Delargy, Hugh
Freeson, Reginald


Blackburn, F.
Dell, Edmund
Galpern, Sir Myer


Boardman, H. (Leigh)
Dempsey, James
Gardner, Tony


Booth. Albert
Dewar, Donald
Garrett, W. E.


Bottomley, Rt. Hn. Arthur
Diamond, Rt. Hn. John
Ginsburg, David


Boyden, James
Dickens, James
Gordon Walker, Rt. Hn. P. C.


Bradley, Tom
Dobson, Ray
Gray, Dr. Hugh (Yarmouth)


Bray, Dr. Jeremy
Doig, Peter
Grey, Charles (Durham)


Brown, Hugh D. (G'gow, Provan)
Driberg, Tom
Griffiths, Eddie (Brightside)


Brown,Bob(N' c' tle-upon-Tyne, W.)
Dunn, James A.
Griffiths, Will (Exchange)


Brown, R. W. (Shorcditch &amp; F'bury)
Dunwoody, Mrs. Gwyneth (Exeter)
Hamilton, James (Bothwell)


Buchan, Norman
Eadie, Alex
Hamilton, William (Fife, W.)


Buchanan, Richard (G'gow, Sp'burn)
Edwards, Robert (Bilston)
Hannan, William


Butler, Herbert (Hackney, C.)
Edwards, William (Merioneth)
Harrison, Walter (Wakefield)


Butler, Mrs. Joyce (Wood Green)
Ellis, John
Hart, Rt. Hn. Judith


Cant, R. B.
English, Michael
Haseldine, Norman


Carter-Jones, Lewis
Ennals, David
Hattersley, Roy







Hazell, Bert
MacMillan, Malcolm (Western Isles)
Randall, Harry


Heffer, Eric S.
McNamara, J. Kevin
Rankin, John


Henig, Stanley
Mahon, Peter (Preston, S.)
Rees, Merlyn


Hilton, W. S.
Mahon, Simon (Bootle)
Richard, Ivor


Hooley, Frank
Mallalicu,J.P.W.(Huddersfield,E.)
Roberts, Albert (Normanton)


Houghton, Rt. Hn. Douglas
Manuel, Archie
Roberts, Gwilym (Bedfordshire, S.)


Howarth, Harry (Wellingborough)
Mapp, Charles
Robinson, Rt.Hn.Kenneth(St.P'c'as)


Howarth, Robert (Bolton, E.)
Marquand, David
Rodgers, William (Stockton)


Howie, w.
Mason, Rt. Hn. Roy
Rogers, George (Kensington, N.)


Hoy, Rt. Hn. James
Maxwell, Robert
Ross, Rt. Hn. William


Hughes, Rt. Hn. Cledwyn (Anglesey)
Mellish, Rt. Hn. Robert
Ryan, John


Hughes, Hector (Aberdeen, N.)
Mendelson, John
Shaw, Arnold (Ilford, S.)


Hughes, Roy (Newport)
Mikardo, Ian
Short, Rt.Hn.Edward(N'c'tle-u-Tyne)


Hunter, Adam
Millan, Bruce
Silkin, Rt. Hn. John (Deptord)


Irvine, Sir Arthur (Edge Hill)
Miller, Dr. M. S.
Silkin, Hn. S. C. (Dulwich)


Jackson, Peter M. (High Peak)
Milne, Edward (Blyth)
Slater, Joseph


Jay, Rt. Hn. Douglas
Mitchetl, R. C. (S'th'pton, Test)
Small, William


Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Molloy, William
Snow, Julian


Jenkins, Hugh (Putney)
Moonman, Eric
Spriggs, Leslie


Jenkins, Rt. Hn. Roy (Stechford)
Morgan, Elystan (Cardiganshire)
Steele, Thomas (Dunbartonshire, W.)


Johnson, Carol (Lewisham, S.)
Morris, Alfred (Wythemhawe)
Strauss, Rt. Hn. G. R.


Jones, Dan (Burnley)
Morris, Charles R. (Openshaw)
Symonds, J. B.


Jones, Rt.Hn.Sir Elwyn(W.Ham,S.)
Morris, John (Aberavon)
Taveme, Dick


Jones, J. Idwal (Wrexham)
Moyle, Roland
Thomas, Rt. Hn, George


Jones, T. Alec (Rhondda, West)
Mulley, Rt. Hn. Frederick
Thomson, Rt. Hn. George


Judd, Frank
Murray, Albert
Thornton, Ernest


Kelley, Richard
Neal, Harold
Tinn, James


Kenyon, Clifford
Newens, Stan
Tomney, Frank


Kerr Mrs. Anne (R'ter &amp; Chatham)
Noel-Baker,Rt.Hn.Philip
Tuck, Raphael


Kerr, Russell (Feltham)
Ogden, Eric
Urwin, T. W.


Lawson, George
O'Malley, Brian
Walker, Harold (Doncaster)


Leadbitter, Ted
Orbach, Maurice
Wallace, George


Lee, Rt. Hn. Frederick (Newton)
Oswald, Thomas
Watkins, David (Consett)


Lee, Rt. Hn. Jennie (Cannock)
Owen, Dr. David (Plymouth, S'tn)
Watkins, Tudor (Brecon &amp; Radnor)


Lee, John (Reading)
Owen, Will (Morpeth)
Weitzman, David


Lever, Rt. Hn. Harold (Cheetham)
Page, Derek (King's Lynn)
Wellbeloved, James


Lewis, Arthur (W. Ham, N.)
Palmer, Arthur
Whitaker, Ben


Lewis, Ron (Carlisle)
Pannell, Rt. Hn. Charles
Wilkins, W. A.


Lomas, Kenneth
Park, Trevor
Willey, Rt. Hn. Frederick


Lougilin, Charles
Parker, John (Dagenham)
Williams, Alan Lee (Hornchurch)


Luard, Evan
Parkyn, Brian (Bedford)
Williams, Clifford (Abertillery)


Mabon, Dr. J. Dickson
Pavitt, Laurence
Williams, Mrs. Shirley (Hitchin)


McBride, Neil
Pearson, Arthur (Pontypridd)
Willis, Rt. Hn. George


MacColl, James
Pentland, Norman
Wilson, William (Coventry, S.)


Macdonald, A. H.
Perry, Ernest G. (Battersea, S.)
Winnick, David


McGuire, Michael
Perry, George H. (Nottingham, S.)
Woodburn, Rt. Hn. A.


McKay, Mrs. Margaret
Prentice, Rt. Hn. Reg
Woof, Robert


Mackenzie, Gregor (Rutherglen)
Price, Christopher (Perry Bar)
TELLERS FOR THE NOES:


Mackie, John
Price, Thomas (Westhoughton)
Mr. Joseph Harper and Mr. John McCann.


Mackintosh, John P.
Price, William (Rugby)



Maclennan, Robert
Probert, Arthur

Clause added to the Bill.

New Clause 25

LOAN APPLIED IN ACQUIRING INTEREST IN A PARTNERSHIP

(1) This section applies to a loan to an individual to defray money applied—
(a) in purchasing a share in a partnership, or
(b) in contributing money to a partnership by way of capital or a premium, or in advancing money to the partnership, where the money contributed or advanced is used wholly and exclusively for the purposes of the trade, profession or vocation carried on by the partnership, or
(c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (and, if free of interest, assuming it carried interest).

(2) Relief shall be given in respect of any payment of interest by the individual on the loan—
(a) if throughout the period from the application of the proceeds Df the loan until the interest was paid he has personally acted in the conduct of the trade, profession or vocation carried on by the partnership, and
(b) if he shows that in that period he has not recovered any capital from the partnership, apart from any amount taken into account under the next following subsection.

(3) If at any time after the application of the proceeds of the loan the individual has recovered any amount of capital from the partnership without using that amount in repayment of the loan, he shall be treated for the purposes of this section as if he had at that time repaid that amount out of the loan, and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.

If under the following provisions of this Act this section applies to a loan part only of which fulfils the conditions in this section, so as to afford relief for interest on that part the deduction to be made under this subsection shall be made wholly out of interest on that part.

(4) The individual shall be treated as having recovered an amount of capital from the partnership if—
(a) he receives a consideration of that amount or value for the sale of any part of his interest in the partnership, or
(b) the partnership returns any amount of capital to him or repays any amount advanced by him, or
(c) he receives consideration of that amount or value for assigning any debt due to him from the partnership.

In the case of a sale or assignment otherwise than by way of a bargain made at arm's length, the sale or assignment shall be deemed to be for consideration of an amount equal to the market value of what is disposed of.

(5) Subsections (2), (3) and (4) above shall apply to a loan within subsection (1)(c) above as if it, and any loan it replaces, were one loan, and so that—
(a) references to the application of the proceeds of the loan are references to the application of the proceeds of the original loan, and
(b) any restriction under subsection (3) above which applied to any load which has been replaced shall apply also as respects the loan which replaces it.

(6) Subsection (1) above shall not apply to a loan unless made in connection with the application of the money, and either on the occasion of its application, or within what is in the circumstances a reasonable time from the application of the money, and that subsection shall not apply to a loan the proceeds of which are applied for some other purpose before being applied as described in that subsection.

(7) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.—[Mr. Diamond.]

Brought up, and read the First and Second time, and added to the Bill.

New Clause 26

LOAN TO PURCHASE MACHINERY OR PLANT USED BY A PARTNERSHIP

(1) Where an individual is a member of a partnership which under section 44 of the Capital Allowances Act 1968 is entitled to a capital allowance or liable to a balancing charge for any year of assessment in respect of machinery or plant belonging to the individual, he shall be entitled to relief on any interest paid by him in that year on a loan

to defray money applied as capital expenditure on the provision of that machinery or plant.

(2) No relief shall be given under this section in respect of interest falling due and payable more than three years after the end of the year of assessment in which the debt was incurred.

(3) Where the machinery or plant is in use partly for the purposes of the trade, profession or vocation carried on by the partnership and partly for other purposes section 28 of the said Act (part-time use) shall apply in relation to relief under this section as it applies in relation to writing-down allowances.

(4) Interest eligible for relief under this section shall be deducted from or set off against the income of the individual for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.—[Mr. Diamond.]

Brought up, and read the First time.

Mr. Deputy Speaker (Mr. Harry Gourlay): I suggest that it would be convenient for the House at the same time to discuss the proposed Amendment to the new Clause, in subsection (2) leave out ' three ' and insert 'six'.

Mr. Diamond: I beg to move, That the Clause be read a Second time.
The new Clause parallels two provisions to which I will refer briefly. The first is Section 44 of the Capital Allowances Act, 1968, which provides for a partnership to be given capital allowances in circumstances in which individual partners purchase capital assets. The allowance attributable to each partner's property is set off against his share of the profits in arriving at his total income for tax purposes.
The other provision which is being paralleled by the new Clause is Schedule 13(8), which allows relief to an employee for interest on money borrowed to buy a car and so on, which he uses in the course of his duties, and accordingly he is able to claim a capital allowance.
It is with these two provisions in mind that the new Clause proposes that members of a partnership should be able to claim relief for interest on money borrowed to buy cars or other plant and machinery which remains the property of the individual partner. I can think particularly of a car purchased by a doctor who is one of a partnership of doctors or a car purchased by a surveyor who is one of a partnership of surveyors.
There is no earthly reason why the law should insist on the partnership buying


the asset so long as the asset is used for business purposes. I trust that, with this short explanation, this proposal will meet with the approval of the House.

Mr. Richard Wainwright: I am able to offer a much less qualified welcome to this new Clause than to the two previous ones. It is at least free from extraordinary attempts to define the indefinable and to import into a completely new context old definitions invented for a quite different purpose. It is innocent of the grave faults we have been debating.
I propose to speak to the Amendment, which refers to the duration of the loan. Let it be clearly understood that the new Clause provides this relief for only three years in respect of the money raised to buy plant and machinery. My hon. Friends and I contend that that is too short a period. I concede that motor cars will be one of the most frequent uses to which personal loans will be put in partnerships. If the term "plant and machinery" is intended mainly to cover motor cars there may be a case for only three years, but partnerships require very much more durable plant and machinery than motor cars.
Often the purchase of a particular item of expensive plant is due to the advocacy of a particular partner. For example, a partnership of civil engineers or accountants may require a great deal of calculating. It is usual for one partner to have a particular interest in mechanising some of the processes of their work and the other partners may be acquiescent but not enthusiastic. They say, "You are keen about this. You raise the money and finance the purchase of this partnership asset". It may be a desk computer or some less elaborate calculating machine, or something for work in the field. It will certainly last longer than the three years suggested in the Clause.
In normal circumstances for raising loans I would agree to the three years and say that if the asset is by no means exhausted at the end of three years one could call it a day and try to come to a new arrangement with the bank. That would be perfectly possible if we were living in normal, civilised, well-governed times, but it is part of the whole tragedy of Clause 18 and trying to patch it together with secondhand Elastoplast that

this allowance is producml at a time when to go to the bank is the simplest plan for reallocating loans is to invite disaster. The bank managers—who can blame them?—seize upon every request for what would be a normal allocation of credit and say, "This must be a new matter, and I am bound to refuse the application for a loan."
We live in times of such rigidity that to go near a bank for a reallocation is to invite trouble. It seems unfair that for a number of important taxpayers who make a contribution which few others could make at the end of the three years the relief should be withdrawn when the loan could go on for longer if the asset had anything up to 10 or 12 years' life.

Mr. Higgins: We are going through a rather remarkable set of Clauses—no fewer than six—amending no more than two Clauses in the Bill. I agree with the hon. Member for Colne Valley (Mr. Richard Wainwright) that this is a Clause to which we can give more enthusiastic support without qualification than to those we have discussed so far today. I share with the hon. Member the point he made about why it is necessary to impose a three-year limit in this case rather than say that we shall work on the basis of the value of the asset until such time as it is written off. That seems a more reasonable basis than the one put forward by the Chief Secretary. Nevertheless, we agree that the right hon. Gentleman is doing everything he can to meet a number of po nts which were raised in Committee. If he can give us a few more words of explanation, we shall be grateful to him.

Mr. Diamond: I recognise the point made by the hon. Member for Colne Valley (Mr. Richard Wainwright), who described a partnership which is a little unusual. It is a partnership in which the partners disagree, being partners jointly concerned in a venture to make profit out of their business, as to whether the partnership should act in a certain way or not, but they are prepared to agree if only one partner finances the expenditure. The hon. Member knows better than I that the cost of that expenditure going well or ill will fall on all the partners. The fact that one partner provided it in the first place may be a facility, but no more.
It would be difficult to mention a case where the plant and machinery described


by the hon. Member could not at any time be provided by the partnership through the simple expedient of the partner who has the money to finance it lending the money to the partnership, the partnership buying the machine and repaying the purchase price and the partner with the funds creating a new loan in favour of the partnership and, therefore, the interest being allowed, the asset being the property of the partnership. That would appear to be a normal occurrence.
The hon. Member is right in thinking that I was concerned mainly with cars and assets which, like cars, may remain in the ownership of a partner because they are used partly by the partner and partly by the partnership. The hon. Member recognised that for a car a period of three years is reasonable. Six years would be much too long. In the vast majority of cases the asset would be a car. I see no barrier against the partnership acquiring an asset of the kind envisaged by the hon. Member in which the loan would go on as long as was wished if it were made 'to the partnership itself.
I think the way in which the Clause is devised is appropriate. Three years is a reasonable period, but six sears would be difficult. I am grateful to the hon. Member for his welcome to the new Clause and sorry that I cannot reciprocate by recommending the Amendment to make it six years.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause 27

LOAN TO PAY ESTATE DUTY

(1) This section applies to any loan to the personal representatives of a deceased person the proceeds of which are applied—
(a) in paying, before the grant of representation, estate duty in accordance with section 6(2) of the Finance Act. 1894, being estate duty in respect of personal property of which the deceased was competent to dispose at his death payable on delivery of the Inland Revenue affidavit, or
(b) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off.

(2) Interest paid on the loan in respect of any period ending within one year from the making of the loan within subsection (1)(a) above shall be deducted from or set off against

the income of the personal representatives as such for the year in which the interest is paid:

Provided that in relation to estate duty on property the principal value of which falls to be ascertained under section 55 of the Finance Act, 1940 (shares and debentures of certain companies) this subsection shall have effect with the substitution for one year' of three years '.

(3) No relief shall be given under this section in respect of interest on so much of any loan as is applied in paying estate duty in respect of property situate in Great Britain which did not pass to the personal representatives as such, or in respect of property which, even if it had been situate in Great Britain, would not have passed to the personal representatives as such.

(4) Sufficient evidence of the amount of estate duty paid in accordance with the said section 6(2) in respect of any particular description of property, and of any statements relevant to its computation in the Inland Revenue affidavit, may be given by the production of a document purporting to be a certificate from the Board.

(5) For the purposes of this section—
(a) estate duty' means estate duty leviable under the law in force in Great Britain or the law in force in Northern Ireland, together with any interest payable on the duty,
(b) references to interest in respect of a period ending on or before a given time apply whether or not interest continues to run after that time.

(6) This section shall apply to estate duty leviable under the law of Northern Ireland with the substitution for the estate duty enactments mentioned in this section of the corresponding enactments forming part of the law or Northern Ireland, and with the substitution of ' Northern Ireland ' for Great Britain ' in subsection (3) above, and the reference to the Board shall include a reference to the Ministry of Finance for Northern Ireland.—[Mr. Diamond.]

Brought up, and read the First time.

8.0 p.m.

Mr. Diamond: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker (Mr. Harry Gourlay): With this new Clause the House may also discuss the following Amendments: No. 30, in page 19, line 38, at beginning insert:
(1) the following subsections shall not apply in respect of interest paid on money borrowed to pay Estate Duty
No. 46, in page 21, line 43, at end insert:
(3) Subject to the provisions of this section interest is eligible for relief under this section if it is paid on money applied to the payment of estate duty until such time as the assets of whatever nature securing the loan are disposed of or distributed to the beneficiaries.

Mr. Diamond: The Clause follows on representations which were made on both sides of the Standing Committee and which I have been willing, and indeed content, to accept, because here we have a special set of circumstances which are not mirrored in any other case that I have found or of which I am aware, where the State itself compels—I repeat "compels"—the borrowing of money, no matter to what amount, in the circumstance that we all know of—that is, where an affidavit has to be put in to obtain the right to wind up the estate of a deceased person and, before that affidavit can be accepted, the cash has to accompany it, and where there are no means whatsoever of touching the personalty of the estate to finance the duty which has to be paid.
I would not for one moment suggest that the method of collecting this duty, again hallowed by precedent and by many years, should be changed. It is a convenient one for the estate duty collector and should remain, but, if it is to remain, I am bound to recognise that the State itself is putting a compulsion upon an individual to borrow money. There is no way of avoiding it in respect of the matters referred to in the Clause—that is, personalty and those matters where executors themselves are responsible and not others.
In those circumstances I think it is right that we should recognise this and take it completely outside other circumstances. I repeat that I am not aware of any other case which is on all fours or at all parallel with this and I have therefore been content and quite willing to accede to the representations which were made and to put the Clause before the House. I will leave it at that and listen to arguments based on the Clause and on the Amendments and perhaps say a few words later.

Mr. Patrick Jenkin: Those who served on the Standing Committee will remember that the Amendment to provide relief for interest paid on loans raised to provide for estate duty was the first Amendment we came to on Clause 18. The Chief Secretary on that occasion, and on that occasion alone throughout the whole of the debates on Clause 18, expressed sympathy. Therefore, of all the new Clauses

and of all the Amendments to Clauses 18 and 19 which we found in the current Notice Paper, this was the one which we expected with the greatest of optimism to see. Here it is. We are very glad to see it.
The Chief Secretary has explained that it is confined to particular circumstances —for instance, that it is only a loan raised to pay estate duty on personal property, because it is only that estate duty the payment for which is conditional upon the granting of probate. Estate duty on real property can be paid by instalments and therefore, on the argument that the relief is applicable only because the State compels the payment, that would be excluded.
Furthermore, the Chief Secretary made it clear in Committee that there would have to be a time limit. The time limit is, we would believe, the somewhat short one of one year as contrasted with the three years in the Section 55 case where the valuation of shares in a director-controlled company is being dealt with.
I want to comment upon the grounds upon which the relief has been granted. Here I am doing no more than echoing in the present context arguments which have already been put in the context of the earlier Clause. For where is the principle of Clause 18? In Committee I argued for the relief which is embodied in the Clause on the grounds of the great hardship which the absence of relief would cause to the beneficiaries of the estate if the whole or a substantial part of the estate was swallowed up in paying interest on the loan and there was nothing left for the beneficiaries to live on until the estate had been distributed and the loan had been paid off.
The Chief Secretary was hot in his indignation: no such argument could possibly be adduced, in his view, to support the case. He said this:
It is not a question of additional hardship. I have said that I am bound to reject that argument because the purpose behind the whole of the Clause is that money should be more difficult to borrow and not easier to borrow."—[OFFICIAL REPORT, Standing Committee F, 18th June, 1969; c. 299.]
The right hon. Gentleman has now sought to justify, as indeed he justified his sympathy in Committee, on the ground that this was a case of the State compelling someone to borrow money.
The right hon. Gentleman is guilty of sophistry. He is failing to distinguish between the reasons in equity why tax relief should be granted in particular circumstances from the surrounding circumstances, from the conditions of relief which will entitle the tax payer to this equitable treatment. The only reason throughout all these Clauses why it is right for the Government to accede to the case which has been advanced for the granting of tax relief is that it is inequitable not to grant it—that is, it is a matter of hardship: it is a hardship to a man buying a share in a partnership that he would not be allowed to claim tax relief on the interest paid on a loan to enable him to purchase his share; it would be a hardship for a proprietor of a close company not to be able to claim interest on a loan raised to put capital into the company; and, equally, it would be a hardship to the estate of a deceased person if the executors had to pay the loan interest gross out of the net income of the estate.
This is the essence of the case which we seek to make about the whole of Clause 18 and of which the new Clause is but an example. With each concession that the Government feel themselves bound to make in the interests of equity, so they are eroding any principle that there may ever have been in the Clause in the first place.
I want to make it abundantly clear that we think that the Government are absolutely right to make these concessions—to pick, as my hon. Friend the Member for Worthing (Mr. Higgins) rather graphically put it, the pellets out of the targets which were not meant to be hit by the shotgun. But it leaves us in a state of complete confusion as to what the principle is that the Government are seeking to adhere to when they maintain the rest of the Clause.

New Clause 28

LOANS MADE ON OR BEFORE 15TH APRIL, 1969

(1) Relief shall be given in respect of any payment of interest falling due before 6th April 1975 on a debt incurred on or before 15th April 1969, being annual interest—



(a) on which the recipient is chargeable to tax under Case III of Schedule D, and


5
(b) which is not interest on a debt incurred by overdrawing an account with the creditor,



where both the date when the payment fell due and its amount were fixed by or under arrangements made when the debt was incurred, or subsequent arrangements in force on 15th April 1969.

There is no principle. Once again we have a piece of anti-avoidance legislation which has gone far wider than it need have done and which, therefore, has to be justified by reference to some sort of principle. Yet when one deals with the cases of hardship—this is a case of hardship, whatever the Chief Secretary may say; if this relief were non-existent under the new Clause, it would be a case of hardship for the people concerned—one finds oneself with no discernible principle left.

We shall seek to press the argument further in the debates on the Amendments to Clauses 18 and 19. Suffice it to say now that we welcome the Clause, though we would like it perhaps to have been a little more liberal, particularly with regard to the period of one year which it specifies. The Government must recognise, however, that by tabling the Clause and granting this welcome and necessary relief, the absence of which would create hardship, they are eroding any principle that Clauses 18 and 19 may have had in the first place.

I have no doubt that the Chief Secretary disagrees with almost every word that I have said.

Mr. Diamond: indicated assent.

Mr. Jenkin: I am grateful for the right hon. Gentleman's ready assent to my last statement. But the fact of the matter is that I am right and there are very few people inside or outside the House who have had much to say in favourable comment upon the logic of the Chief Secretary's argument on Clauses 18 and 19.

Question put and agreed to.

Clause read a Second time and added to the Bill.

10
(2) Relief shall be given in respect of any bank, discount or stock exchange interest paid after 5th April 1970 if, assuming that it had been paid without deduction of tax when it became due and payable, relief could have been given in respect of it under section 200 of the Income Tax Act 1952.


15
(3) Interest eligible for relief under this section shall be deducted from or set off against the income of the person paying the interest for the year of assessment in which the interest is paid, and income tax shall be discharged or repaid accordingly.



—[Mr. Diamond.]

Brought up, and read the First time.

Mr. Diamond: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker: I understand that it will be for the convenience of the House to discuss at the same time certain other Amendments, as follows:

Amendment (n) to the new Clause, in line 2, leave out '1975' and insert 1995'.

Amendment (o) to the new Clause, in line 3, leave out 'under Case III of Schedule D, and' and insert 'or '.

Amendment (ee) to the new Clause, in line 8, at end insert—
Plovided that where an overdrawing consists partly of a fixed debt and partly of a fluctuating debt, then relief shall be given under this subsection in respect of interest on the fixed part of the debt.

Amendment No. 31, in Clause 18, page 19, line 38, at beginning insert—
(1) Notwithstanding anything to the contrary in this Act, relief shall continue to be given for interest paid by an individual under a liability incurred before 16th April, 1969, as if this Act had not been passed, except that tax shall not be deducted from any interest paid after 5th April, 1970 (unless section 20 of this Act applies) and relief shall be given, if the individual paying the interest so claims, by deducting or setting off the interest against his income for the year of assessment and income tax shall he discharged or repaid accordingly.
Relief shall not be given both under this subsection and any other part of this Act.

Amendment No. 32, in Clause 18, page 20, line 8, leave out 30th June 1969 ' and insert—
'the passing of this Act'.

Amendment No. 34, in Clause 18, page 21, line 3, leave out 30th June 1969' and insert—
'the passing of this Act'.

Amendment No. 307, in Clause 21, page 24, line 40, at beginning insert:
(1) Notwithstanding anything to the contrary in this Act, relief shall continue to be given for interest paid by a close company under a liability incurred before 16th April, 1969, as if this Act had not been passed, except that tax

shall not be deducted from any interest paid after 5th April, 1970 (unless section 20 of this Act applies) and relief shall be given if the close company paying the interest so claims, by deducting or setting off the interest against its income for the year of assessment; and tax shall be discharged or repaid accordingly. Relief shall not be given under both this subsection and any other part of this Act.

It has been suggested also that, if the House agrees, we could conveniently discuss at the same time the following Government Amendments:

Amendment No. 212, in Clause 18, page 20, line 38, leave out from or ' to if ' in line 39 and insert:
'section ("loans made on or before 15th April 1969") of this Act'.

Amendment No. 213, in Clause 18, page 21, leave out lines 13 to 15 and insert:
(a) to interest on any debt incurred after 15th April 1969, and
(b) to interest paid after 5th April 1975 on a debt incurred on or before 15th April 1969.

Amendment No. 215, in Clause 18, page 21, line 24, leave out from first ' 1970 ' to end of line 26.

Mr. Diamond: I am sure that it will be for the convenience of the House, Mr. Deputy Speaker, if we accept your wise suggestion. I shall explain the Government Amendments in my speech.
In coming to new Clause 28, we come to the question of hardship. To everything said hitherto about hardship by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) I have, fortunately, turned a deaf ear. I say "fortunately" because if one had restricted the case for estate duty relief to those cases where hardship had been proved, there would have been very little in the concession which I broposed and which the House has just lbeen good enough to accept. I, therefore, outlined a quite different case, as I did in Committee, which the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) himself elucidated. We come now, however, to the question of hardship.
In moving from one system to another, one must reserve to a Government the right to say that Finance Bills come each year, or sometimes more often, and they must have freedom, in their responsibility for managing the country's economy, collecting revenue and providing for public expenditure, to introduce new taxes notwithstanding that individual citizens may have entered into commitments and arrangements on the basis of the tax as it then was and in the hope that the tax would continue in the same form and with the same effect.
Although one must reserve to any Government the freedom to do that, a wise Government must in appropriate cases—on is not creating a precedent here or departing from principle—have regard to all circumstances. The circumstances of a change of the kind we are proposing are unusual and infrequent. They are in unusual and infrequent in the sense that for a good long time we have had a system under which interest on loans qualified for relief from tax purposes, where tax was paid, and we are now moving to a system under which that will not apply as regards the private individual.
I had, therefore, turned over in my mind, having listened carefully to the representations made in Committee, what was the best way of meeting any possible hardship which might arise. I am sure that the best way is to have regard to firm commitments which the individual taxpayer has entered into in the confident expectation that the law would remain unaltered. I repeat that we cannot maintain that state of affairs for him, but we can see to it that as far as possible the transition from one régime to another takes account of hardship so far as may be reasonable and appropriate in the particular circumstances of the case.
8.15 p.m.
We had already taken that element into account in the proposals put in the Bill in the first place. It was proposed as regards bank overdrafts not that the interest should cease to qualify immediately the Bill was introduced or on Budget day but that it should cease to qualify at the most convenient date somewhat ahead, namely, the end of June this year, as which date banks have the habit of calculating the interest in ques-

tion for the year or half-year. As regards loans, we had proposed that interest should continue to qualify until 5th April next year.
It was suggested—a considerable point was made of this—that there would be many taxpayers who had entered into firm commitments—I repeat "firm commitments"—and who would not be able to adjust their affairs with reasonable convenience by 5th April next. I say "reasonable convenience" because part of the purpose of the new proposal was to encourage a reduction in borrowing, or, in a positive sense, to encourage the habit of saving. In that sense, therefore, we could not accept that there should be no difficulty however small.
Having listened carefully to the representations put to us, we have come to the view that it would be right to give a somewhat longer period—in my view, a considerably longer period—for that adjustment to take place so that individual taxpayers could without undue inconvenience adjust their affairs. We propose, therefore, that interest paid on a loan incurred before Budget day should continue to be allowable not until 5th April, 1970, but until 5th April, 1975. That is practically six years from the time when borrowers first had notice of the new provisions.
The reception of this proposal has been mixed. I have received a fair amount of criticism that the Government have gone too far in providing for that length of time and that a period somewhere between 1970 and 1975 would have been adequate. When legislating for the whole of the population, it is impossible to legislate in such a way as to meet every possible argument. Perhaps one has gone a little on the generous side. Nevertheless, that is our proposal which I put to the House now.
Now, a point of machinery quite distinct from the point of principle. It was proposed that tax deduction at source on loan interest should cease on 5th April next. That proposal remains. As regards machinery, therefore, relief on interest on loans qualifying until 1975 will be given by deduction at source until April 1970 and by variation of the assessment or adjustment in the P.A.Y.E. coding from then until April, 1975. That is a minor matter of machinery, but inasmuch as it does not move forward the same five


years as the principle of meeting hardship does, I thought it right to mention it here.
You have been good enough to say, Mr. Deputy Speaker, that we should discuss other Amendments at the same time. Having regard to our experience on the first group of Clauses and Amendments, I think that it would be more convenient to allow hon. Members who have put their names to them to speak to those matters, and I shall speak only to the Government Amendments, the first of which is No. 212. This is a small, consequential Amendment. Amendment No. 2E; is also a consequential Amendment, and Amendment No. 215 is proposed in consequence of the extension of relief on the interest for old loans.

Mr. Nott: I welcome new Clause 28, and have no mitigation of my welcome to put forward. I want merely to ask for clarification on a number of matters.
My first question arises from the Chief Secretary's comment that he had been criticised for selecting 1975. I do not necessarily expect him to answer this question, but I would be fascinated to know who could have criticised him for selecting that date rather than 1970, other than perhaps the Chancellor or the Inland Revenue. I cannot think that anyone in possession of a loan could criticise him for choosing it.

Mr. Diamond: Two senior Privy Councillors on this side of the House immediately come to mind.

Mr. Nott: I am grateful to the right hon. Gentleman for making it clear that it came from his right hon. Friends, because I was surprised at this criticism.
The first of my main points relates to the normal endowment policy. Probably a major proportion of the savings generated in the private sector find their way through such a policy. This means of saving, together with house mortgages and perhaps deposits with building societies, is crucial to this country's prosperity. Anything which discourages the taking out of endowment policies must be detrimental to the country.
Since the endowment is effectively one of the principal ways in which people save for a rainy day, what does subsection (1)(b) mean? Does it mean that the person who has an endowment policy

will have interest allowed for tax relief only if he borrows up to the total surrender value of the policy, or that if he is borrowing against his endowment policy up until 1975 he will also be allowed against tax interest on money which he borrows over and above the surrender value?
A person may take out an endowment policy and five years later have a minor financial crisis of his own and decide that he wishes to borrow against the security of the policy. It is not clear to me, or to one or two people in the insurance world to whom I have spoken, whether subsection (1)(b) enables such a person to borrow only up to the surrender value of the policy at that time—in other words, the amount he has put in—or whether it allows him to borrow an additional sum on the security of the policy up until 1975.
My second point concerns education policies. The Chief Secretary said that the Chancellor had tabled the Clause to try to avoid hardship to some extent. I remember the rather unruly brawl we had in Standing Committee on the question of insurance companies and the undertaking given in a previous Finance Act. If the right hon. Gentleman was thinking of education policies and trying to remove the hardship there, the 1975 date does not go quite far enough. It would not be unusual for a parent to take out the normal education policy when his child was two, and the normal age for a child to go to a private preparatory school is eight. Under the normal type of policy, the one most used, the parent would seek to borrow against the policy at almost precisely the moment the Clause runs out, because it has about six years to run. On the very day the child arrived at school the six years would have expired. Just at the moment when the parent first needed to borrow against the policy, he would be debarred from doing so.
That is quite a fair example. If a parent had taken out such a policy five or six years ago, he might just be all right. But if he had taken it out even two years ago I think that he would not be covered by the 1975 date. I do not necessarily go for the rather exaggerated date of 1995 mentioned in Amendment (n), but it would have been a much more valuable concession on education policies to extend the date rather further than the


six years the right hon. Gentleman has chosen.
I now come to a slightly more technical point—the question of when the debt referred to is incurred. There are several schemes for share purchase— the London and Manchester, the Yeoman, and one other. Let us consider the London and Manchester scheme for borrowing against a policy for share purchase. One of the reasons underlying the Government's policy on overdraft interest was to cut down borrowing for share purchase.
8.30 p.m.
I do not agree with the Government's attitude towards this. I understand that this is one of the objectives which they seek. All that we are trying to do is to protect a person who had taken out a policy with, say, the London and Manchester, secure in the knowledge that insurance policies of this sort would be able to continue. We were not discussing the retrospective nature of the thing in a legal sense but, as the Chief Secretary has said, in a hardship sense. I know one person who took out an endowment policy attached to a share purchase scheme, and the shares were bought between 29th March and 2nd April this year.
We might assume that this person is all right on the debt at least up to 1975 but the settlement date for Stock Exchange purposes was 27th April. This is a crucial matter for this individual and he inquired of the Inland Revenue what the position was. I can give the Chief Secretary the gentleman's name later if he wants it, the reference on the letter is PS1452/69. The Revenue replied, no doubt seeking to protect its position:
In the Board's view a debt for money lent is not incurred until the lender has actually paid the money.
I do not understand that interpretation. It may be valid legally, but I would have thought that the debt would in practice have been incurred when the contract was entered into, not at the time of completion. Many of my hon. Friends are lawyers and they may he able to put a different interpretation upon this. It is a loophole and I wonder whether it has been covered.
The Chief Secretary was keen to remove all matters of hardship. This is not just generosity on his part, there is

also the fact that the Financial Secretary made this controversial statement in last year's Committee, which was something we discussed early in the morning. The Government have rather more than just an obligation to make a concession here. They could in some respects be deemed to have completely misled certain people who took out insurance policies and who now find themselves in a quite different position. Even though this now extends to 1975, it still does not cover first of all the endowment policy which extends for 15 years or maybe 25 years, and secondly it is not clear to me or to several people in the insurance companies to whom I have spoken whether (1)(b) enables people to borrow up to the surrender value only or beyond that value against the security of the policy until 1975. Thirdly, although this concession has been made—I have used the word "concession" erroneously—

Mr. Diamond: Could I ask the hon. Gentleman to be a little clearer when he says "borrowing up to 1975" on this insurance policy question? Does he mean Interest on a loan borrowed, which loan interest ranks for relief up to 1975, or does he mean new borrowing after 1969, and made some time during a period between 1969 and 1975?

Mr. Nott: Let us say an endowment policy was taken out on 14th April, 1969, the day before Budget day. Then in 1974 this individual had some minor financial crisis, or alternatively, it may be an endowment policy taken out to pay educational fees. If the individual then borrows up to the surrender value of the policy, is that allowable? After all, the money is his, it is money he has already paid in.
Secondly, if he borrows beyond the surrender value these words
by overdraw an account with the creditor 
are open to all sorts of interpretation and can lead to difficulties. Insurance companies to whom I have talked regard it differently. Can the right hon. Gentleman look at the question of commitments entered into which straddle Budget day? Maybe a contract was entered into for 15th April but actual completion did not take place until 22nd April.

Mr. A. H. Macdonald: I should like to extend my welcome to the


new Clause. In Committee a number of hon. Members on both sides offered thoughts on this topic, and I ventured to make a few remarks. The Chief Secretary listened to the arguments and has now come forward with the Clause. I wish, from the back benches on this side of the House, to express appreciation of that.
I differ from the unknown, unnamed Privy Councillors on this side who think that the Chief Secretary has gone too far. I do not think that he has. If I had been responsible for fixing the date, I should have chosen 1976 rather than 1975. In Committee I confined myself to the effect of the new provisions in the Bill on fixed-term borrowing. My right hon. Friend may be interested to know that it is within my experience that there are transactions of that nature which extend over seven years. Seven-year transactions would have been entirely covered if 1976 rather than 1975 had been the operative date. However, I shall not press that point because it is a minor detail and there are not many such seven-year transactions.
I hope that it will not be thought ungracious if I say something in mitigation of the general welcome which I give to the new Clause. It relates to fixed-term borrowing agreements to which I referred in Committee. As I understand it, the effect of the new Clause, taken with Clause 18, will be that in April next year finance houses which now have on their books fixed-term borrowing agreements will be under an obligation to recast those agreements. I am advised that currently there are 2 million such agreements. Therefore, an appreciable number of that 2 million will be current at that time.
A certain amount of work will be involved for the finance houses. They will have to get into touch with their customers to advise them of the instalments now payable gross. No doubt this will occasion some surprise to those borrowers and correspondence will have to ensue and the borrowers, assuming that they agree, as they will have to do eventually, will have to find an additional amount of cash because they will be paying cash gross. They will get in touch with the Inland Revenue to claim the relief which will be available to them after April, 1970. The Inland Revenue will have to make the necessary computations

to allow the relief for which they will qualify. There will be an appreciable amount of work for the finance houses, some work for taxpayers and a not inconsiderable amount of work for the Inland Revenue. The net product of all that additional work will be to produce exactly the situation which exists now without it.
If the principle of new Clause 28 is accepted, would it not have been possible simply to allow existing agreements to run until they expire on the present basis of paying the instalments net? Surely that would have been much more simple administratively. I understand that approaches have been made in this connection. I am advised that the reply was that there was no administrative difficulty in allowing the existing agreements to run and that it is simply a matter of policy whether to adopt the method set out in the new Clause or, as I suggest, to allow the existing agreements to run until they expire.
It is possible that there is a good reason for adopting this method, and I should be more than grateful if my right hon. Friend would say what those reasons are. On the face of it, it would seem to be simpler to allow the existing state of affairs to continue until lie agreements which are now current have expired, and for agreements subsequently coming into force to come under the new provisions.

Mr. Michael Shaw: The right hon. Gentleman based his case in advancing new Clause 28 on the des re to alleviate hardship as distinct from the reasons which he put forward for the previous new Clause. I thank him for the fulsome way in which he honoured his promise in the Committee to give sympathetic consideration to the question of estate duty.
A very different consideration arises on new Clause 28, as the right hon. Gentleman has said. The new Clause by no means deals with all the hardship that will arise in relation to bank interest. I will, if I may, give one or two simple examples.
I give first the example I gave in Committee of the young director of a close company who was offered shares in the company because it was realised that he would be an important man in the company in the future. It was arranged that he should borrow money from the bank to enable him to buy the shares. In the


last few months the question has arisen whether the interest on that loan would continue to be allowed against his income for tax purposes, and we have not until this weekend known this for certain. It now appears that it will not be allowed because the director does not have a 5 per cent. share in the company.
One can now advise him to buy more shares so that the interest on the loan will be allowed, but if he cannot do that he will be under a pressing need to get rid of his bank overdraft.
That man is suffering hardship, first, because interest will not in future be allowed, as his interest represents less than a 5 per cent. share in the capital. Secondly, neither he nor his advisers could make up their minds whether or not the bank overdraft would have to be closed down until this weekend, after 30th June, which is the closing date. There would have been a strong case for extending the date until it is known for sure what will be the final shape of the Clause.
My other example concerns a director in a close company who is not a full-time director but one who gives a considerable amount of time to the company, and who has been instrumental in providing share capital to enable the company to continue and to expand. He subscribed part of the share capital as the result of an arrangement with the bank whereby he borrowed the money, and it was understood by all parties that the overdraft would be reduced only gradually and would be repaid over a considerable time. Because that person will not in future be able to set interest on that loan against his income, he will be hard put to it to find the cash to repay the loan immediately. The repayment of the instalments to which he is committed will be the more difficult to find because he will have to pay the interest on that loan out of net income and not out of gross income.
8.45 p.m.
Such situations arise and can cause hardship in relation to bank interest. Events have proved that 30th June was far too early a date to fix for interest on bank loan since after the introduction of those modifications the whole shape of the Clause has been completely changed, with the result that people could not reach a final decision before 30th June.

Although I welcome new Clause 28, I believe that it has not gone far enough.

Mr. John Smith: I do not welcome the Clause because, like my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw), I feel that it does not go nearly far enough. We have heard today a great deal about principle, and indeed many principles have been advanced. The chief principle of the Chief Secretary, so far as I understand it, is that interest should be allowable for businesses but not for individuals.
Why should there be a distinction between business borrowing personal borrowing? There are various possible explanations. Is it puritanism? Is it to be the rule that one can have an overdraft to conduct one's business but cannot have an overdraft to conduct one's life—or if one does have an overdraft one must pay more for it?
What is the logic of the distinction between business borrowing and personal borrowing? For example, my investment trust can borrow to buy a Canaletto to put on the walls of my office and the interest will be allowable for tax. But if I borrow to buy a Canaletto to hang on the walls of my house the interest is not allowable for tax. The principle seems to be the wrong way round.
Why should there be these two rates of interest, a high rate for individuals and a low rate for businesses? Is this what Socialism is about? What do the hon. Gentlemen on the other side think about this, or, to put it in the subjunctive, what would they think about this if they were here? Further, if we are to have differential interest rates—it is something of which this country, to its great credit and prosperity, has steered clear for longer than have many foreign countries —why are we now to put a premium on not paying one's tax? I have not heard that the rate of interest on unpaid tax is to go up; and as that was never allowable for tax, it now becomes a great deal cheaper than borrowing from a bank to pay the tax. No doubt this has been catered for.
The Chief Secretary, having pursued his principle, said in Committee
… it is inevitable … that a great advantage enures to a business man … which the private individual … is denied".


I do not see why it is inevitable, but if it is, certainly that is not a principle. It is an effect, but not a principle.
To pursue the possible reasons for this, the Chief Secretary also said:
When we reintroduce a provision of this kind it is just as well to have an established procedure which is clear in the minds of those who have to operate tax both on the side of the Revenue and the side of the taxpayer.
That is an unexceptionable statement. Bt.t we have seven pages of Clauses in the Bill, seven pages of new Clauses in the name of the Chancellor on the Notice Paper, ten and a half pages of Schedules and 15 pages of Amendments. In those circumstances, surely this cannot come under the heading of a clear and established procedure.
The right hon. Gentleman went on in Committee:
I have heard nothing which would cause confusion or difficulty in the carrying-out of the tax in the way in which it is proposed to he carried out.
I hope that Inland Revenue inspectors throughout Britain will note those words; indeed, I hope that the Horse Marines will note them. They will be asked to distinguish between different types of borrowing, which even a customer's own bank cannot do in many cases. These poor inspectors will have to distinguish between improvement and maintenance, and I well remember that the difficulty of distinguishing between the two was given as one of the reasons for abolishing Schedule A.
I once had a letter from a constituent illustrating the point. He told me that he had had some repair work done to a pillar supporting a bay window in his house and, unfortunately, his builder sent in a bill for moving the pillar. For the purposes of Schedule A, it would have been an improvement if it had been moved but maintenance if it was merely repaired. The inspector had to be satisfied that it was a genuine mistake on the part of the builder. Surely we have not reached the point where relief is given on interest on money borrowed to add to one's house, but not on money borrowed in order to mend the roof. I cannot be, lieve that that is a Socialist principle or a good one.
Furthermore, this is yet another example of that type of provision which

erodes honesty. An example was given in Committee, though not apropros this point, of a shopkeeper who borrows to buy a chair for his shop, in which case the interest on that loan is allowed. But suppose that his wife moves the chair into the parlour. If he and his wife sit on the chair in the parlour, they are crooks. I can imagine that shopkeeper seeing his wife carry the chair from the shop into the parlour and prepare to sink onto it. He will cry out, "Don't do it!" and then they will have to discuss whether the money was borrowed to buy the chair before or after the date in this Bill and whether the sum was raised by way of loan or overdraft.
Another principle which has been mentioned, though not as a chief one, arises from the Chief Secretary's statement in Committee that
… the purpose behind the whole of the Clause is that money shou'd be more difficult to borrow and not easier to borrow.— [OFFICIAL REPORT, Standing Committee F, 18th June, 1969 c. 299, 338, 335 and 349]
I have never understood the blithe assumption that borrowing -js always advantageous but always bad, like so many other things in life which are agreeable but forbidden. I have never thought that that applied to borrowing. Has it applied to borrowing over the past few months? I suggest that a customer who had been prevented by his bank manager from borrowing to buy equities over the past few months would be grateful.
I should have thought that this assumption was more a Freudian confession of failure. It is a confession that it is now better to have anything rather than money, and that again is a principle which I do not accept and do not believe should be encouraged.
Furthermore, and another reason why the new Clause is not sufficiently wide, the overdraft system is one of those great British commercial inventions which has contributed enormously to our prosperity. It is an immensely practical and economical way of harnessing the liquid resources and cash of the entire country. It will be greatly damaged by the new Clause.
We have heard again today, although I did not notice it when reading through the Committee proceedings, a distinction between borrowing with a "firm commitment and borrowing, presumably by


way of overdraft, without a firm commitment. The original distinction, when dealing with crucial dates, was said to be a question of liquidity—the ease with which one could repay an overdraft. That is sensible. If it is not easy to repay an overdraft owing to the nature of the assets against which it has been borrowed, it is right that one should have a little longer in which to repay the borrowing.
We now have a new principle, the "firm commitment". Is a mortgage a firm commitment? I imagine that most hon. Members would say that a mortgage was a very firm commitment. But a mortgage is repayable at much shorter notice than many overdrafts. How, therefore, are we to settle on a firm commitment as the principle which can divide one type of borrowing from another?
What also seems to have been completely ignored is that some loans cannot be repaid early. They are firm commitments in which there is no provision for early repayment. Indeed, they often contain a penalty clause, if there is early repayment, and the penalty can be equivalent to a steep increase in the rate of interest.
Another principle which has been mentioned is that of reducing consumption. This could well work the other way. My hon. Friend the Member for Worthing (Mr. Higgins) touched on the notion which I am about to explain when he said that if people are allowed to borrow up to a certain percentage, whether they need it or not they will borrow to that limit. That is profoundly true. It was proved during chocolate rationing after the war. Because people had a chocolate ration they bought it and ate it. When the ration was abolished, consumption went down. That will undoubtedly be the effect with borrowing.
In the same way, many people who are obliged to pay off their overdrafts will have larger incomes, because most overdrafts nowadays are charged against assets which yield less in income. If the generality of customers of the bank in which I worked were forced to pay off their overdrafts, which have been a healthy brake on their consumption, I feel sure that their consumption would increase. In the days when bank statements were healthily printed in red—at

least mine always were, although the Chief Secretary probably does not know what that means—I always found that they acted as a healthy brake on my consumption. Now that is to disappear.
If the purpose is to discourage consumption, what is then wrong with borrowing to speculate? Speculation has nothing to do with consumption. Interest on borrowing to speculate, if we are out to stop consumption, should be allowed, because the two things are completely separate. I suspect—

Mr. Brian Harrison: On a point of order, Mr. Deputy Speaker. Is it right that such an important debate should proceed with fewer than 40 Members present?

Notice taken that 40 Members were not present;

House counted, and, 40 Members being present—

9.0 p.m.

Mr. Smith: I am grateful to my hon. Friend for that heroic attempt to obtain an audience for me.

Hon. Members: The hon. Gentleman will lose it now.

Mr. Smith: The part of my speech which emptied the Chamber related to this search for a principle behind the Clause, and I think that probably the real principle is a wish to curb speculation. For many years I worked in an ordinary deposit bank. For a good many of those years I used to conduct the half-yearly audit of all the loans and overdrafts, and very tedious it was. It took several days, in the course of which one examined every loan and overdraft, what they had been taken for, and what they were secured again. I assure the Chief Secretary that even in the bank in which I worked, whose customers I suspect the right hon. Gentleman would think are particularly prone to all the activities of which he disapproves, it was exceptionally rare to find anyone who borrowed in order to speculate. Far the commonest cause of borrowing which appears to be of that nature is borrowing out of laziness, and I think the Chief Secretary will find that he has done a good turn to many people whom he does not want to help at all by obliging them to put their houses in order.
My hon. Friend the Member for Worthing spoke of the shotgun approach, of the Government's principle that to bring down a target in the crowd one lets off a shotgun, and if a few innocent people are peppered it cannot be helped. In my view, that is a false analogy. But I think that the Chief Secretary is like a man who is startled by a noise in the night and leaps up and lets off his gun at what he believes to be a burglar—and it turns out that there is no burglar there at all. There is no target for this legislation. All that the right hon. Gentleman has done is to pepper his family.
I believe that the Clause will have further damaging effects on the economy. It will encourage people to invest further in non-income-producing assets, which is something I deplore, and which is bad for the country. Hitherto, if someone borrowed to invest in non-incomeproducing assets, and he had no other income, or not sufficient income, in effect he paid a very much higher rate to do so than if he borrowed to buy income-producing assets, which are what make the country "go". Now there will be no difference between the cost of borrowing to buy income-producing assets and the cost of borrowing to buy non-income-producing assets. This will give a further shove in that undesirable direction.
Finally, there is one more principle which has been advanced—by us—and it is the correct principle, namely, that if a man has assets, and he is borrowing money on which he pays interest, he does not own the whole of those assets, and therefore he does not own the whole of the income derived from them. The Chief Secretary said that he does not accept that, which I feel classes him as a financial flat-earther.
There is an analogy here. If the Chief Secretary uses the argument that a man's assets and his borrowing cannot be set off together for income tax purposes, will he next year introduce legislation to say that a man's borrowing and assets cannot be set off for estate duty purposes? Estate duty is not levied on the gross estate. This principle is recognised when assessing people to estate duty. How can a distinction be drawn between assets when it comes to estate duty and assets when it comes to income tax? That principle, which has been advanced before and which I advance again, is the correct

principle. In short, for the sake of an imaginary bogey we are plunging our wretched productive people still further into a morass of legislation. They will be left struggling in that morass while happier and more sensible countries do not subject their productive citizens to this obstacle race—do not subject their industrialists to three-legged egg-and-spoon races run in sacks. For the sake of tilting at an imaginary bogey, the right hon. Gentleman has taken us a long way further down that road.

Mr. Graham Page: Before my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) started to speak, I thought that I had only one problem with the new Clause. I now have so many problems that I do not know where to start. My hon. Friend has shot so many holes in the new Clause that it is looking like a bit of Gruyère cheese.
My problem is contained in Amendment No. 307, which relates to Clause 21. My question is: does new Clause 28 cover the loans and interest referred to in Clause 21? That Clause deals with the special provisions for certain close companies in connection with the allowance of interest as a deduction from taxable income, and the Clause starts by saying that "all" interest of a close company
shall be apportioned … as if the interest were income of the close company …".
The Clause then goes on to say to what companies and to what interest the Clause applies and does not apply. The Clause contains no exemption for interest upon a loan which has already been taken and under which, before the Finance Bill was published, the borrower was already obliged to pay interest.
The Amendment would relieve the close company in the case where liability was incurred before 16th April, 1969 and interest continued to be payable in respect of the loans. We have heard from the Chief Secretary that new Clause 28 is intended to relieve those who have entered into a firm commitment. [Interruption.] My hon. Friend has just asked whether a mortgage is a firm commitment. I should have thought that there could be little doubt about that. It must surely be a firm commitment. But where a close company has borrowed before the publication of the Bill from an individual, a


building society or an institution like an insurance company, will it get the benefit of new Clause 28?
I do not understand the provisions in new Clause 28 which place a restriction on its application. It will give relief only in cases where the recipient is chargable to tax under Case III of Schedule D. It will give relief only when it
…is not interest on a debt incurred by overdrawing an account with the creditor…".
Will a close company borrowing from an institution, being obliged to pay interest on that borrowing and having entered into that obligation before having knowledge of the Bill, get relief under the new Clause?

Mr. Diamond: Would the hon. Gentleman tell me the purpose of the borrowing of this close company? Was it for business purposes?

Mr. Page: A close company is not likely to borrow for personal reasons, and I assume, therefore, that as it is in business it is borrowing for trading purposes.

Mr. Diamond: As I will do my best to answer the hon. Gentleman's question, I want to be sure that I have understood it. Indeed, I do not understand why he is pursuing the matter if he is referring to borrowing for business purposes.

Mr. Page: Have I the Chief Secretary's assurance that Amendment No. 307 is unnecessary and that a close company, when borrowing for such a purpose, will be relieved under the new Clause or that the new Clause does not affect a close company because it gets its relief elsewhere? Since Amendment No. 307 is being discussed with the new Clause, I assumed that it had something to do with it.

Mr. Diamond: According to my hearing, the Chair did not say that Amendment No. 307 was being discussed with the new Clause.

Several Hon. Members: It is.

Mr. Page: I have the list of selected Amendments and new Clauses, and I assure the right hon. Gentleman that it is included. The purpose of Amendment No. 307 is to make sure that a close company which had entered into an

obligation before 16th April by borrowing money and had entered into an obligation to pay interest on it will be relieved from the provisions of Clause 21(1). I have asked a simple question. I may be naïve in asking it. I hope I am and that the right hon. Gentleman will assure me that the close company will get relief.

Mr. Patrick Jenkin: Before my hon. Friend the Member for Worthing (Mr. Higgins) comments on the general remarks of the Chief Secretary and the new Clause, I wish to refer to Amendment (ee), a starred Amendment which Mr. Speaker has been kind enough to select.
The purpose of this Amendment is to consider the question of an overdraft where the borrower has a loan account with the bank and a fluctuating overdraft but where, for obvious reasons of saving cost and for administrative convenience, the two have been combined into one. The Chief Secretary shakes his head, but I am told that this is a perfectly normal arrangement. A customer at a bank has an overdraft which fluctuates—under new Clause 28 this would not be allowable—but he may have a loan account. He borrows £10,000 and agrees to pay it off over 10 years at £1,000 a year. I am told that it not unusually happens that for simplicity's sake the bank runs only one account with the fluctuating limit kept on and with the reduction of the outstanding part of the loan account up to £1,000 a year.
9.15 p.m.
I understand, and my hon. Friends more familiar with banking matters will no doubt confirm, that if a bank manager insists on keeping a separate loan account with separate entries for repayments that is to be taken as in some way a reflection on the credit of the borrower. This is intended to impose a more stringent discipline on the borrower than if there were only one account. The Chief Secretary may not accept this as being usual, but I ask him to accept it as usual for the purpose of the debate. If this happens the new Clause as drawn would prevent the allowance of relief on any interest, even on the fixed part of the overdrawing, the indebtedness, the part which if it were a separate loan account would qualify.
The purpose of Amendment (ee) is to enable a distinction to be drawn between


the fixed part of the account and the fluctuating part so that the interest chargeable on the part of the account represented by the fixed loan will be allowed up to April, 1975, whereas the part of the interest applicable to the fluctuating part of the overdraft would not be allowable. I fully recognise that the wording of the Amendment may not be wholly adequate, but I believe the point is a sound one.
If it is the case that the less creditworthy borrowers are obliged by bank managers to have a separate loan account, the result of the Clause as drawn would be that the less credit-worthy would qualify for relief on their loan account, whereas the more credit-worthy, who have the two accounts lumped into one, would find that their interest is disallowed over the whole. I cannot believe that is the intention of the Government, yet it appears to be the meaning of the Clause.

Mr. Higgins: My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) and I are in some danger of appearing as "The Gondoliers" in Gilbert and Sullivan's opera of that name, but we thought it would be better to act on the excellent principle of division of labour by confining ourselves to individual Amendments attached to new Clause 28.
We welcome the fact that the Chancellor has seen fit to table this Clause, but the attitude of sweet reason which the Chief Secretary adopted in Committee by saying that he would listen to all the arguments and in due course sort out the Bill if the Government thought that necessary is not a satisfactory way of legislating. A number of points covered by the new Clauses we are considering should have been included in the Bill when it was originally drafted. It is not necessary to go into elaborate procedure to realise that many of those points must have been perfectly obvious and the Government ought to have taken account of them in the first place.
There is a particularly unfortunate aspect of this qua this new Clause, because many people, perhaps underestimating the persuasiveness of the Opposition, or for some other reason, may already have given up policies, particularly educational policies or policies of the London and Manchester type to

which my hon. Friend the Member for St. Ives (Mr. Nott) referred, in the expectation that the Government had firmly made up their minds when they introduced the Bill in the first place and were not likely to introduce a new Clause of this kind.
I have enormous sympathy with people who have acted in this fairly rapid fashion. I think that it is a consequence of the fact that the Government have seen fit to bring in what is almost a draft Bill and then sought to amend it with many more new Clauses than there were original Clauses covering this aspect. Particularly in view of what my hon. Friend the Member for St. Ives said—unfortunately, my hon. Friend is unable to be with us at this time—if the Inland Revenue is to engage in correspondence defining on what date the loan is taken out-and I am sure that the Inland Revenue must have added heavy qualifications of the type, "Subject to the Bill's going through"—this is a point which must be borne in mind.
I want very quickly to ask one or two specific questions of the Chief Secretary, who has rightly pointed out that the purpose of the Clause is to alleviate hardship, in the sense that people have undertaken commitments and then suddenly find that the law on which they were relying is being changed by the Bill. My hon. Friends have on the Notice Paper an Amendment which seeks to lengthen the period over which existing contracts shall continue to enjoy relief from income tax from 1975 up to as far ahead as 1995.
My own view is that, clearly, if the contract exists it should run indefinitely, but it would probably be wrong for us to go into the Lobby in support of this Amendment, because we have made it clear that we disagree with the whole concept of the Government's measure in principle. If we were to vote on this kind of Amendment, we might be in much the same position as we seem to have got into on S.E.T., where if we say, "We shall abolish it as soon as possible", people think this is less strong than saying. "We shall abolish it." Therefore, it would be wrong for us to vote on the Amendment, but I believe that it is wrong to impose a limit on this and that the right solution is to alter the whole principle on which the Chancellor's conception of this question is based.


Amendment No. 31 covers the open-ended point. Amendments Nos. 32 and 34 seek to alter the original expression in the Bill which suggests that the subsections shall apply from 30th June to the date when the Bill becomes law.
In page 20, line 6, the word "all" still appears. It is rather difficult to reconcile this with the new Clause, because, if I understand it correctly, this means that all the interest is disallowed, and then the new Clause will apparently exclude some. The Chief Secretary might care to give attention to that point.
At all events, this new Clause and the many other new Clauses should not be referred back to 30th June, 1969. One would have thought that they should operate from some future period beyond the time when the actual part of the legislation was introduced in the House. We therefore hope that the Chief Secretary will see his way to accepting those Amendments.
I come to the interpretation of the words in line 6 of the new Clause:
when the payment fell due and its amount were fixed by or under arrangements made when the debt was incurred, or subsequent arrangements in force on 15th April 1969 ".
I should have thought that it would be possible to improve the drafting by deleting the words
when the debt was incurred, or subsequent arrangements 
and simply saying "a debt which existed on that date".
What is the position if payment falls due on a debt which has its amounts fixed but the amounts reduce steadily? As I understand the Government's intention, it is that the contract shall have been a firm contract, not one which alters. It is surely possible to have a contract which is quite firm but the amounts payable and the total amount in fact reduce. It seems that this may not be covered by the new Clause as drafted, and I should appreciate the right hon. Gentleman's comments on it.
Subject to that, we consider that this is at least some improvement on the position as we found it in Committee, and we welcome the new Clause.

Mr. Diamond: The hon. Member for St. Ives (Mr. Nott)-who has passed me a courteous notice explaining his in-

ability to be here at the moment—raised questions based on his assumption that borrowing which took place after the date of the Budget but arising out of an insurance policy entered into prior to the date of the Budget, which may have contemplated some borrowing taking place, was borrowing which attracted qualifying interest. That is not so. We are concerned only with interest on a loan which arose before the date of the Budget.
My hon. Friend the Member for Chislehurst (Mr. Macdonald) raised a matter of which I am well aware. The representations which he made have been brought fully to my attention, and I myself went into the matter at length to see whether we could meet the difficulty which he raised. It would be wrong for my hon. Friend to assume that there are no administrative difficulties. It is impossible to deal specifically and exclusively with the cases which he has in mind, which are fairly numerous from the standpoint of particular finance houses, though small in relation to the totality of cases. It is impossible to deal with them exclusively from other cases.
I was fully aware of the difficulty. I wish that it could have been met. I am satisfied that great care and attention has been given to it. It has all my sympathy. I am sorry that I cannot find a way to meet it. I hope that my hon. Friend will realise that there is no lack of desire or attention here implied. It just does not seem possible to meet that temporary difficulty, which will arise over the next two years, probably, in those cases. However, I assure him that, inasmuch as what is exercising the mind of the finance houses is their relationship to their customers and their wish that borrowers will keep up their commitments in the new circumstances, I shall see to it that there is full co-operation between the Revenue and the finance houses so as to assist in the fulfilment of that operation. I think that I can be of some assistance there.
The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) asked about the repayment of a bank overdraft by fixed instalments. Was it not unfair, he asked, that in the case of a bank overdraft which had been created before the date of the Budget, with repayment by instalments agreed, certain instalments should rank for relief and other instalments should not? I do not say this firmly


without going into the question carefully with the hon. Gentleman, but I offer what I hope is the helpful advice that he should look into the matter to see whether the circumstances which he poses is that of a bank overdraft at that stage. If a bank overdraft ceases to be a running account and becomes a fixed account, the manager saying to the customer at a certain point, "You have had enough and from now on you must reduce by certain instalments", it ceases to be a bank overdraft and becomes a loan, which would attract relief. I think that that is right. It is different in nature and would continue to attract relief. I am glad that the hon. Gentleman raised the question. I hope that he will give it further thought. It may well be that there is no problem there.
9.30 p.m.
The hon. Member for Cities of London and Westminster (Mr. John Smith) made a long and amusing speech. As he is apparently not present, I shall not delay the House by replying to it. Indeed, I might be considerably out of order if I replied to any part of it.
I now come to the questions put to me by the hon. Members for Wanstead and Woodford (Mr. Patrick Jenkin) and Worthing (Mr. Higgins). The hon. Member for Wanstead and Woodford put to me the case of a combined account, and asked me to assume that such an animal existed. Fairly full inquiries have been made, including inquiries of the appropriate group of bankers, and we are unaware of this arrangement. But if, unfortunately, it exists, what he is describing is a current account of a particular, odd variety. It is working as a current account on an overdraft, but from time to time the customer pays in a certain amount by way of an instalment. But what he describes is a running account, and therefore the amount overdrawn will vary from day to day, but over a period it will reduce. In short, the graph of the overdraft will be a wiggly line tending to come downwards—a wiggly, not a fixed line, and not coming down in clear steps. The hon. Gentleman has described to me a current account, which therefore would not rank.

Mr. Patrick Jenkin: I think that the account I was describing would come down in wiggly steps. That is, each step would wiggle, but there would be a per-

fectly clear reduction, on the case put to me of £1,000 being paid in once a year to reduce the overdraft, and then there would be the fluctuating account at that level.

Mr. Diamond: Once a year? That is clearly an ordinary current account into which the customer pays £1,000 once a year, but for the rest of the time payments in may vary from nothing to a million pounds and the payments out may similarly vary. It is very difficult to deal with the position with precision, because it is unknown to us, although we have made considerable inquiries as to its existence.
The hon. Member for Worthing asked whether an account would still be a fixed account of the kind that would rank if the instalments were not regular but were reducing instalments. Indeed, it would. What he described is not a current account but an account in which there is a fixed arrangement. The way in which the commitment to reduce the account may be carried out may be altered from time to time, but that does not alter the nature of the account. In my view, what he described is a perfectly normal loan account, the interest on which would rank within the limitation I have described.

Mr. Higgins: I find it difficult to reconcile that with the wording of the Clause, which says:
… the payment fell due and its amount were fixed …
I should have thought that the amount varied.

Mr. Diamond: No. The amount of the repayment may vary, but that does not alter the fact that the loan is one that is distinguished from a current account, and therefore is the one on which interest ranks. Any account could be paid off at any time. There may be penalties attached to paying off any amount at any time, but there is nothing to stop a borrower paying off at any time any amount he wants to pay off. The creditor cannot refuse it.
It would not alter the nature of it if he wanted to pay it off in that way. It is not a current account which is being used regularly and which is being overdrawn. It is the current account on which interest ceases to be allowable after the end of June. It is right to treat it in this way. The hon. Member for Scarborough


and Whitby thought that we were being a little harsh in bringing that to an end at the end of June, but I do not think so. There is nothing like the same commitment where we are dealing with an overdraft. Many overdrafts have, I am glad to say, been appropriately dealt with at the end of June, and it would be unwise to reconsider that situation especially as we are being, I hope the House will agree, so helpful with regard to loans generally.
The hon. Member for Worthing asked whether we were prepared to extend the period until 1995, and he made it clear that he would not be astonished if we were, regrettably, not prepared to do so. This would really be tantamount to carrying on the qualified interest virtually for ever. It would be impossible to have two systems running side by side, on one of which interest was allowed but which was disallowed on the other. We are meeting the point of hardship by dealing with the period up to 1975.
I see that the hon. Member for Cities of London and Westminister is back in his seat, so perhaps I may turn to his speech and in particular that part of it which interested me enormously when he drew attention to an alleged anomaly arising out of him borrowing money to buy a Canaletto and his investment company borrowing money to buy a Canaletto. I was not at all sure that there was any anomaly from the way that he described it.
It seemed that if this investment company was, as he described it, his investment company it would be a close corporation. Secondly, it seemed that if the purpose of the transaction was as he described it, to acquire a Canaletto to hang in his home, then in either case this was not a business transaction which attracted interest. If it was a personal borrowing there is no inconsistency. If he is putting to me the argument that it is right and necessary that those who wish to buy a Canaletto through a loan should have interest relief on exclusively personal borrowing, I can only say that this is one of the few occasions where he and I differ fairly profoundly.

Mr. John Smith: I was only illustrating one of the very many illogical aspects of this legislation by remarking that as

an example a company may buy, as a piece of furniture, a valuable picture to put in the office of its chairman and get interest allowed for tax purposes, which I think is a bad thing. On the other hand, an individual cannot buy such a picture to hang in his own home and get relief on the interest, which I think is an equally bad thing.

Mr. Diamond: We have expressed our respective points of view. The hon. Member for Crosby (Mr. Graham Page) asked me a question which as far as I can see was, as he was good enough to put it, an unnecessary question. He asked me, if a company borrows for business purposes, do certain other circumstances affect the issue? They do not. If a company borrows for business purposes that is the end of the matter. I hope that in those circumstances this new Clause will be approved. I am sorry that I cannot recommend acceptance of the Amendments.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 29

RELIEF FOR PAYMENTS OF INTEREST: FURTHER PROVISIONS

(1) This section has effect as respects relief under section 19 of this Act or sections (' loan applied in acquiring interest in close company '), (` loan applied in acquiring interest in a partnership '), (' loan to purchase machinery or plant used by a partnership '), (' loan to pay estate duty ') and (' loans made on or before 15th April, 1969') of this Act (in this Act referred to, together with this section, as the sections of this Act giving relief in respect of interest ').
(2) Where credit is given for any money due from the purchaser under any sale, that shall be treated for the purposes of the said sections as the making of a loan to defray money applied by the purchase in making the purchase.
(3) If interest is paid at a rate in excess of a reasonable commercial rate, so much of any payment as represents such an excess shall not be eligible for relief under any of the said sections.
(4) Where the whole of a debt does not fulfil the conditions required by any one of the said sections, relief shall be given under the section only in respect of the proportion of any payment of interest equal to the proportion of the debt fulfilling those conditions at the time of the application of the money in question.


 (5) The relief shall only be given on the making of a claim to which section 9 of 01.; Income Tax Management Act, 1964 shall apply, and an appeal on the claim shall be to the General Commissioners unless the appellant elects that it shall lie instead to the Special Commissioners.
(6) If relief is given in respect of any interest under any of the said sections, the interest shall not be allowable as a deduction for any other purpose of the Income Tax Acts.
(7) No relief shall be given against income chargeable to corporation tax, or any other income of a company.
(8) No relief shall be given in respect of—

(a) interest which is payable under deduction of tax by virtue of section 169 or section 170 of the Income Tax Act, 1952, except where paid without deduction of tax to a bank carrying on a bona fide banking business in the United Kingdom, or
(b) interest in respect of which relief may be given under section 200 or section 445(3)(b) of that Act, or
(c) interest paid before 6th April. 1969.—[Mr. Diamond.]

Brought up, and read the First time.

Mr. Diamond: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker(Mr. Sydney Irving): With this new Clause we can take the Amendment to the new Clause, in subsection (2) after ' given ', insert:' (other than on the normal course of apportionment of income, outgoings and deposits)' and Government Amendment 214.

Mr. Diamond: I hope that it will be for the convenience of the House if I speak very shortly to this new Clause. It provides for relief of payment of interest, and the provisions are purely technical. I can deal with any one of them if the House wishes. They do not raise any principles of the kind we have been discussing in the previous Clauses.
I turn to Amendment No. 214.

Mr. Patrick Jenkin: We on the Opposition Front Bench are grateful that we had notice that the Amendment would be taken with the new Clause. However, for the benefit of other hon. Members, it would be helpful if we could be told the page on which it appears because it is a good many pages ahead and it is very difficult to find.

Mr. Diamond: It is on page 6754 of the Amendment Paper. It gives relief on interest for which the provisions of Schedule 13 are relevant.
I think that it would be convenient if I left the matter there. I expect that the hon. Member for Crosby (Mr. Graham Page) will wish to address me. I shall listen with my usual care to what he says.

Mr. Graham Page: I refer to the Amendment to new Clause 29, which appears on page 6722 of the Amendment Paper. Subsection (2) of new Clause 29 provides:
Where credit is given fir any money due from the purchaser under any sale, that shall be treated for the purposes of the said sections as the making of a loan to defray money applied by the purchaser in making the purchase.
That wording seems to me to cover the normal apportionments which are almost invariably made in the completion of a purchase—the apportionments of outgoings and of monies paid out in advance and, indeed, giving credit to the purchaser for the deposit he has paid.
I am sure that it cannot be intended to cover items of that sort, but the drafting would seem to bring them into account. If they are brought into account it will cause great trouble and inconvenience to the purchaser and vendor in a normal purchase and sale. I should have thought that to make the position clear the words in parenthesis in my Amendment might be included in the new Clause.

Mr. Diamond: I hope that I understand the point which the hon. Gentleman makes. He refers to the usual apportionment items. So far as my experience goes—and I should have thought that his experience would confirm this—none of these items attracts interest. Therefore, they would be wholly disregarded in the calculation. I am bound to say that I agree with the hon. Gentleman that the Amendment is unnecessary for the reason which I have given.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause No. 4

BETTERMENT LEVY: PAYMENT UPON RECEIPT OF PROCEEDS

At the end of section 45(1) of the Land Commission Act, 1967 (Contents of Notice of Assessment) add:—
' Provided that the notice of assessment shall not specify a date on which the levy is charged earlier than that on which the


proceeds in money or money's worth of the chargeable act or event are due to be received by the person liable to the levy; and so far as those proceeds are to be realised by periodical payments the notice of assessment shall provide for payment of the levy by instalments'.—[Mr. Kenneth Baker.]

Brought up, and read the First time.

Mr. Deputy Speaker: We can take at the same time new Clause No. 1—entitled" Exemption from betterment levy in cases of disposition at a loss "—
The following section shall be inserted after section 56 of the Land Commission Act 1967:
'56A. No levy shall be chargeable in case A where the market value at which a disposition takes place is less than the price paid by the grantor for the relevant land or interest at acquisition '.
New Clause No. 3 entitled "Relief from betterment levy in respect of development value assessed to income tax"—
Where a disposition of land produces a gain assessable to income tax under Case VII of Schedule D and it is shown that this gain includes development value, the facts shall be certified by the Board to the Land Commission who shall thereupon direct that no assessment to betterment levy shall be made in respect of the development value so included in the assessment to income tax.
New Clause No. 5 entitled "Betterment levy: Offset against tax on land dealing"—
Where a person is engaged in land dealings, the profits of which are chargeable to tax under Schedule D, Case 1, as trading profits, that person shall be entitled to offset any betterment levy payable in the relevant accounting period against his liability for tax under Schedule D, Case 1, for that accounting period.
New Clause No. 6 entitled "Betterment levy: Provision for further exemptions"—
At the end of section 63(1) of the Land Commission Act, 1967 (Provision for further exemptions) add and such order may take effect retrospectively so as to affect any chargeable act or event occurring after 5th April, 1967 and may provide for the repayment of levy and interest paid and for the making of objections to notices of assessment out of time '.
and New Clause No. 44 entitled "Betterment Levy: Deduction of Net Development Value from Chargeable Income"—
Where a person—

(i) is assessed to income tax on corporation tax in respect of a transaction in land giving rise to a liability to tax under Cases I, VI or VII of Schedule D, and
(ii) is assessed to betterment levy in respect of the same transaction,

then in computing that person's liability to income tax or corporation tax as aforesaid the net development value upon which the betterment levy has been assessed shall be deductible in ascertaining his taxable income.

Mr. Baker: I beg to move, That the Clause be read a Second time.
These new Clauses seek to mitigate the harshness and unfairness of the betterment levy. The Bill introduces some relief from betterment levy. We believe that it is fragmentary and inadequate, but we welcome it, and it is a tribute to the campaign waged by the Opposition and certain newspapers against the obvious inequities of the betterment levy. The purpose of the new Clauses is to improve the betterment levy. As I said in Committee, trying to improve the betterment levy is like trying to improve a sand castle. One may dig the moat deeper, build a better drawbridge and make the turrets better, but one knows that in the evening the tide will come in and wash away the sand castle. So it is with the betterment levy and the Land Commission. When the Conservative tide comes in both will be washed away.
9.45 p.m.
It may be difficult to dislodge the officials of the Land Commission because officials in new Ministries tend to have prehensile bottoms, and the axe which will have to be employed will have to be a sharp one. But we are committed to this: that while the betterment levy exists we will seek to try to improve it.
The new Clauses deal with different aspects of betterment levy, but the one on which I wish to concentrate is new Clause 4 which concerns the time of payment of the levy. The levy is payable upon the development value, which is the result of a complicated series of sums, but the development value is not necessarily the realisable value. The transaction may not actually have taken place.
Let us take, for example, a large plot of land on the edge of a city. The city may decide to change the use of that land from agricultural into residential, and there is a substantial profit to the lucky landowner. We on this side do not say that the lucky landowner should get off scotfree, but we are saying that the liability to levy that arises when the change of use occurs should be paid only


when a transaction occurs, when the landowner starts to develop.
This is not so at the moment. The development value is defined as an additional value derived from or from the prospect of—and the key phrase is "or from the prospect of"—the right to carry out material development. So there may be a change of use of land on the edge of the city, no material development may take place for many years, but none the less the liability to levy arises.
This matter has been raised recently by the Royal Institute of Chartered Surveyors in an article which appeared in a bulletin published by the Co-operative Permanent Building Society. The case put in this article is a good one, and it is that levy should be paid only when there is a cash flow coming in to the person who has to pay the levy. That, in essence, is the case on this side of the House.
The point is that this levy should run on all fours with other taxes. A capital gains tax is payable only when the capital gain is realised and the cash has come in, In some cases a charge may have to be made before any cash is received by the developer, and we feel that this is unfair. We think that it would not cost much, but perhaps the Minister could tell us what would be the likely cost.
I will content myself with speaking to this Clause and I will leave other hon. Members to speak on the other new Clauses. I hope that the Government will give sympathetic consideration to new Clause 4.

Mr. Evelyn King: I am glad to have the opportunity to support the new Clause. Like my hon. Friend the Member for Acton (Mr. Kenneth Baker) I do not want to raise the whole question of the Land Commission. Although I may in the past have been intemperate in my criticisms of the Land Commission, tonight I make a resolution to be temperate.
My first question is whether there is any precedent whatever for this levy. We are all accustomed to paying taxes in various forms on income and on capital gains. But so far as I am aware every form of tax which has been levied in any other case is levied on a precise income or upon a precise capital gain.

We are here concerned with a tax which is levied on something which is imaginary or ethereal. I know of no precedent for this anywhere else in our system of taxation.
I should like to quote an individual case involving one of my constituents who purchased a house with a large garden. His predecessor had applied for consent for a bungalow at the back of the garden. The planning authority had refused consent largely on the ground that there would be no access to the projected bungalow; access could be provided only on somebody else's land, and the owner of that land was unable or unwilling to provide it. It was evident that the garden could not be developed, but none the less the Land Commission took the view that the ownership might change and that one day it might be developed. It therefore levied a tax on my constituent.
This is the sort of imaginary taxation which I find incredibly hard to justify. It may be said that the person concerned would have a right to appeal, but even on appeal one would be conducting an argument in an imaginary situation. I cannot believe that this is a form of taxation which is either acceptable or just. I beg the Minister to accept the view that to extract money from people who have received no gain out of which to pay that money is a form of justice which cannot be tolerated.

Mr. J. Bruce-Gardyne: I rise to support the points which have been made by both my hon. Friends in moving this group of Amendments. I shall join with my hon. Friend the Member for Acton (Mr. Kenneth Baker) in a year or two in marching with great enthusiasm into the Lobby on the day when this disgraceful body is finally abolished. Meanwhile, we must try to reduce some of its more inexcusable depredations.
I wish particularly to address my remarks to new Clause 1 which stands in my name and which has a purpose that should be supported by all sides of the House. The purpose of the new Clause is simply to ensure that when some luckless citizen is forced to dispose of property at a loss the vultures of the Land Commission do not come along and batten on the meagre return that he may obtain from selling at that loss.


It is a straightforward matter of equity. If I had not watched this Labour Government in operation for four years, I would have assumed that one could take it for granted that the Minister would be able to accept this Amendment at least as a straightforward matter of equity. As hope springs eternal, I still hope for the best.
I also wish to illustrate my remarks by quoting the experience of some of my constituents. This involves a company called the Angus Cinema Company, which had a number of cinemas around Dundee. One of the cinemas was at Newport in the constituency of my hon. Friend the Member for Fife, East (Sir J. Gilmour). The cinema was erected in 1938 at a cost of between £8,000 and £9,000. As the Minister may be aware, in recent years cinemas, particularly those in country areas, have been finding it very difficult to keep going. This cinemas was closed in the mid-1960's and stood empty for some time.
In January, 1968, the company managed to dispose of the cinema at a price of £3,100, registering a loss from the original cost of erecting the cinema of some £5,000. In fact, the sale was, in effect, a forced sale since it was required to reduce the company's overdraft at the request of the bank. Since that date the cinema in question has been turned into a furniture store.
Suddenly, on 13th March of this year, the company's solicitors received a letter from the Land Commission. They could scarcely believe their eyes. They were told that their clients owed £800 to this preposterous body based on a provisional assessment of net development value amounting to £2,000. I would remind hon. Members that that arose out of a loss of £5,000. That is some indication of the staggering nature of this body's operations.
If the company is forced to pay for this little piece of highway robbery, I am told that it will have to go into liquidation. Of course, the company is disputing the assessment with the district valuer, and I have advised the managing director that in no circumstances should he agree to pay a penny piece.
One further little embellishment on this elegant story should be made. No doubt right hon. and hon. Gentlemen opposite have learned by heart the speeches made

by their Leader about the "candyfloss society" in the halcyon days when they were in opposition. I seem to remember that one of the marks of Cain of the candyfloss society was the bingo hall. However, if the cinemas in question had been turned into a bingo hall instead of a furniture store, I understand that the vultures of the Land Commission would have kept away. That is a fine comment on the way in which this Government seek to redeem us from the evils of the candyfloss society.
I understand that the case of my constituents is by no means unique and that there have been several others of a similar nature in England. No doubt the Minister will be more familiar with those English cases than with a case like that of my constituents.
There is a small element of uniqueness about the position of my constituents in that, whereas I understand that the minions on this body in England at least earn their keep however improper the methods by which they earn it, that is not the case of the operations of the Scottish body. To date, it has cost half as much again to operate as it has made in revenue, and that notwithstanding the fact that it has tried to increase its revenue by taxing losses as well as profits.
The principle which I am seeking to establish in my Clause is one which even this Government have recognised as being a principle of good taxation. In the capital gains tax legislation it was laid down quite rightly that if the owner of some equity shares disposed of his shares at a profit on the April, 1965, price but at a loss on the original cost of the equity, no capital gains tax was payable. Although one may have reservations about the capital gains tax, at least that was a measure of equity. In this case, no such measure of equity has been applied.
A number of my hon. Friends have referred to individuals who were required to pay levy when they had had no income from their land transactions. In this case, I am concerned with the, plight of my wretched constituents, who have suffered a substantial capital loss and then have had this monstrous body battening on their losses. I call upon the Minister at least to give us that measure of satisfaction by accepting my Clause.

10.0 p.m.

Mr. Robert Cooke: I should like briefly to support my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and to put to the Minister another point in support of what we are seeking to do.
My hon. Friend illustrated the severe penalty which fell on his constituent for selling his property for redevelopment. If he had not done so, if the property had stood empty and useless, he would have escaped the levy. The Conservative Party having said that it will abolish the whole system, there is considerable inducement not to sell unless one must. However, this was a forced sale.
Whilst it may be out of order to go into an argument on the merits of the Land Commission—and I am not trying to do that—a serious point is involved. There is a compelling reason not to sell similar property for redevelopment unless the owner is forced to do so. Therefore, the benefit to the community of the redevelopment and new use of something tying derelict and idle is lost.
The idea was that the Land Commission would make for more satisfactory use of assets which the community would enjoy in that land and buildings would not be left idle without being developed. Yet, the result of the provisions of the, Land Commission positively compel people, unless they are forced to sell, to hang on to their property. I could quote many cases in support of my hon. Friend, but I will not weary the House with them.
In passing, my hon. Friend mentioned that the Scottish section was not earning its keep. The Minister will remember that I have had exchanges with him at Question Time about the West Country section of the Commission doing things covered by the new Clause. The last thing that I want to say about it is that many people who have tried to work this ridiculous system are so disillusioned that the turnover in staff is quite prodigous and the whole thing is hopeless from everybody's point of view.
I hope that what I have said will help the Minister to make a satisfactory choice.

The Minister for Planning and Land (NU. Kenneth Robinson): We are discussing six new Clauses, three of which

are directly concerned with betterment levy and how it is levied, and the other three principally with taxation matters, albeit with reference to betterment levy.
I should like, first, to deal with the three new Clauses directly concerned with betterment levy, but before doing so perhaps I might deal with one or two of the remarks which have been made by hon. Gentlemen opposite.
I start with the hon. Member for Dorset, South (Mr. Evelyn King) who, as he promised, on this occasion was very temperate. I am grateful to him for that. However, I hope that he will not take it amiss if I say that, as well as being temperate, he was irrelevant, because the particular complaint that he voiced would not be remedied by the application of any of the six new Clauses. He was, as he has done before, challenging the whole principle behind the betterment levy. I have debated it with him before and no doubt I shall again, but not on this occasion.
The hon. Member for Bristol, West (Mr. Robert Cooke) complained that the better use of land, which he said, with some justification, the establishment of the Land Commission was designed to secure, was not being achieved because of the alleged effect of the Conservative Party's pledge to get rid of the Land Commission. I do not accept that this is happening. But, if it is, it is hardly a charge that should be laid against Her Majesty's Government.
New Clause 4, upon which the hon. Member for Acton (Mr. Kenneth Baker) mainly concentrated, seeks to provide that betterment levy becomes payable not as the Act provides as a capital sum when a chargeable event takes place, but only at such time as the proceeds or benefit of that event are converted into money or money's worth.
Reading the new Clause, I took it that it would apply principally to Case B, which is leases, and Case C, which is development; that is, that the effect would take place on the granting of a lease or on the commencement of development, although it could apply to certain cases on the sale of land under Case A. However, these are very few and they are only cases where the consideration is paid in instalments.
I think that the hon. Gentleman, who is rather more knowledgeable than most


hon. Gentlemen opposite on the Land Commission Act and the working of the betterment levy, fell into error on this occasion, because I take it from what he said that he was alleging that betterment levy becomes payable when planning permission is given for a change of use. This is not so. It becomes payable only when a chargeable event takes place. The hon. Gentleman said that in the case of development it should be payable only when development commences. It is payable only in those circumstances, that is Case C, when development actually commences. Normally it is payable when the sale of land takes place, and not when the change of use is authorised by planning permission. It is a basic principle of the Act that the amount due is payable at the time of the chargeable act. The reason for this is that the levy payer then has an asset on the security of which he can, if necessary, obtain funds to meet the levy.
In the case of leases under Case B, which I should have thought new Clause 4 was mainly directed to, the House ought to bear in mind that the sum on which levy is due is discounted to take account of the fact that the levy payer will receive his rent for the period of the lease. Furthermore, if he does not wish to borrow, he can, if he wishes, charge a premium to cover the amount of levy that he has to pay.
In Case C, the start of development is the only practicable point at which to assess current use value, and therefore development value, and I thought that the hon. Member for Acton accepted that in what he said. To delay the point in time of collection of the levy, as the new Clause proposes, would lead to all kinds of complications over assessment, so I could not advise the House to accept this.
New Clause 1 puts forward a proposition which, with two exceptions, is already the general rule in the scheme of levy. The intention of the Clause is merely to remove two exceptions. The first of these concerns the purchase price of land during the interim period, that is between the publication of the White Paper in September, 1965, and the coming into operation of the Act in April, 1967. As I have told the House on more than one occasion, the reason for not accepting

the purchase price as the base value in this instance was to prevent collusive sales and the widespread evasion of levy which would otherwise have been all too simple. This was explained in the White Paper, and subsequently through widespread publicity, but it was found that the provision was operating harshly on some people who had engaged in small land transactions in ignorance of the Government's intention, and it was then that my right hon. Friend announced the two extra statutory concessions, which are given statutory authority in this Bill.
The second exception is that we do not take into account the price paid for a purchase before July, 1948. That is when the 1947 Town and Country Planning Act came into operation. In fact, it would be most unusual for land to be sold today for less than it fetched before July, 1948, but it may well be that the case to which the hon. Member for South Angus (Mr. Bruce-Gardyne) referred is one of these exceptions. I think he recognised that this is a matter for the Secretary of State for Scotland, rather than for me. I do not know whether the hon. Gentleman has been in communication with my right hon. Friend about it, but I shall certainly call his remarks to the attention of my right hon. Friend. Certainly there must be some unusual features about this case if the hon. Gentleman's account of the facts was an objective one. As the new Clause would abolish both those necessary exceptions, I am afraid that I must again advise the House to reject it.
New Clause 6 seeks to add to the provision in the Act for exemptions by Order the power to make such exemptions fully retrospective. This power of exemption has not so far been used, and could in any event be used only to cover small definable groups of case. It was, for example, inadequate and unsuitable for the more complicated changes in the levy which we are making under this Bill. Our objection here is one mainly of principle. Regulation-making powers are not normally made retrospective, and when the power is to be used to alter the application of a tax, I think that the objection is stronger still. Indeed, I am a little surprised to see the name of the Chairman of the Statutory Instruments Committee appended to the new Clause, which I would have thought embodies a


principle quite contrary to that normally adopted by his Committee.

Mr. Graham Page: The right hon. Gentleman is fully aware, of course, that it is a principle of the House to allow retrospective legislation, whether by Statute or by Order, if it is to the benefit of the citizen.

Mr. Robinson: We have had this argument many times, but I was, on this occasion, talking not about the principle of retrospection as such, but about the principle of making changes by Regulation retrospective, which I should have thought was a separate principle. Anyway, it is the Government's view that changes like this are best dealt with by legislation, which is what we are doing in the Bill. There would indeed be formidable practical difficulties, not least those arising from the interaction of capital gains tax and betterment levy, but I would rest chiefly on the argument of principle.
New Clauses 3 and 4 propose that the whole of the development value should be left out of account in the computation of income tax and corporation tax respectively, while new Clause 5 proposes that betterment levy should be set off against tax due under Schedule D, from dealers in land. Under the present law, the amount of levy paid is liable as a deduction in computing either income tax or corporation tax. In this way, it is treated like any other business expense or impost.
Perhaps it could be best illustrated by an analogy with purchase tax. When drawing up an assessment of profits for income tax purposes, any dealer in commodities is entitled to deduct the purchase tax which he has paid in respect of a particular group or groups of commodities. Similarly, a dealer in land would deduct betterment levy already paid, just as would an individual in respect of short-term capital gains on land, which is of course taxable under income tax.
Quite a different principle obtains for long-term capital gains under capital gains tax. To go further than that would be out of keeping with tax more generally and for this reason I must advise the House to reject these three new Clauses. Here again, incidentally, there would be considerable procedural difficulties, which

I will not elaborate at this late hour, since the argument rests again on the issue of principle rather than that of practicability.

Mr. Peter Walker: One thing which one can always guarantee is that a debate on the Land Commission always convinces those who hear it of the urgent necessity to abolish the Commission as early as possible. Tonight has been no exception, as the Minister related the reasons for turning down one new Clause after another.
The first with which he dealt was that containing the outrageous suggestion of my hon. Friend the Member for Acton (Mr. Kenneth Baker), that people should not be made to pay taxes before they have received any money. The right hon. Gentleman dismissed this as a very unreasonable approach and I hope that my hon. Friend feels duly reprimanded. I was very interested in the basic modesty with which the Minister brushed this aside. He said that, after all, the immediate developments have started and been completed, which meant that the owner then had an asset against which he could borrow money to pay his taxes.
This comes from a Government who have imposed the most perpetual squeeze in history, telling all banks to cut down their lending. Now, on the Finance Bill, a Minister says that this tax is based upon borrowing money in order to pay one's taxes. I hope that a directive will go to the banks tomorrow saying that any approach to borrow money to pay the betterment levy will immediately be granted the proper overdraft facilities and that the interest on those facilities will be allowable against tax. Presumably the new policy which the Minister has enunciated means that somebody in this position can go to his bank manager, wave a copy of HANSARD containing the right hon. Gentleman's comments before him, and all will be well. That was the Minister's theory about new Clause 4.
10.15 p.m.
When speaking to new Clause 1 my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) made what appears to the Minister to be the awfully unfair suggestion that if people make losses they should pay taxes. The right hon. Gentleman asked my hon. Friend why he had not written to the Secretary of State for Scotland. I know that my hon. Friend


has written on many occasions to that right hon. Gentleman, but we still have the outrageous case of a Scottish firm having been forced to sell some of its assets at a loss, based on the price it had paid, with the Land Commission coming along and asking for £800 for improvements that had been made to the assets.
Not only is this an absurdity, but the right hon. Gentleman knows it to be absurd. For any Minister to reject a new Clause which is simply designed to ensure that people do not pay taxes if they make losses reveals the remarkable position in which the Government find themselves.
New Clause 6 makes the simple proposition that if the Minister decides to use his powers of regulation if he finds serious hardship, he should be able to do so retrospectively for the benefit of the citizen. But the right hon. Gentleman has the audacity to suggest that my hon. Friend the Member for Crosby (Mr. Graham Page) should not have placed his name to a proposal of that kind. Any hon. Member would be pleased to support such a new Clause, which would provide the Minister with power to undo the hardship caused by thoroughly bad legislation.

As for the suggestion that many of my hon. Friends do not fully understand the Land Commission Act, I assure the right hon. Gentleman that they are not alone. Hardly a solicitor, accountant or other professional man concerned with the matter understands the working of the Act. Indeed, according to the present Minister, the right hon. Gentleman who introduced the Bill understands it least of all, for it was he who constantly argued that the Regulations referred to in new Clause 6 could be dealt with in the Finance Bill.

The absurd Land Commission continues on its weary way. We are told that the changes made in the Bill will mean that 50 per cent. of its work will be eliminated. Accordingly, its staff is being reduced by 15 per cent.—not bad, and a step in the right direction. We have an absurd Land Commission and an absurd system of taxation, as every debate reveals. I therefore not only urge my hon. Friends to divide the House on this matter but to continue their campaign until the wretched Land Commission is finally done away with.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 199, Noes 256.

Division No. 329.]
AYES
[10.18 p.m.


Alison, Michael (Barkston Ash)
Chichester-Clark, R.
Grant, Anthony


Allason, James (Hemel Hempstead)
Clark, Henry
Griffiths, Eldon (Bury St. Edmunds)


Amery, Rt. Hn. Julian
Clegg, Walter
Grimond, Rt. Hn. J.


Astor, John
Cooke, Robert
Curden, Harold


Atkins, Humphrey (M't'n &amp; M'd'n)
Cooper-Key, Sir Neill
Hall, John (Wycombe)


Awdry, Daniel
Corfield, F. V.
Hall-Davis, A. G. F.


Baker, Kenneth (Acton)
Costain, A. P.
Hamilton, Michael (Salisbury)


Baker, W. H. K. (Banff)
Crouch, David
Harris, Frederic (Croydon, N.W.)


Barber, Rt. Hn. Anthony
Cunningham, Sir Knox
Harrison, Brian (Maldon)


Beamish, Col. Sir Tufton
Currie, G. B. H.
Harvey, Sir Arthur Vere


Bell, Ronald
Dalkeith, Earl of
Harvie Anderson, Miss


Bennett, Sir Frederic (Torquay)
Dance, James
Hawkins, Paul


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Davidson, James (Aberdeenshire, W.)
Hay, John


Berry, Hn. Anthony
d'Avigdor-Goldsmid, Sir Henry
Heseltine, Michael


Bessell, Peter
Deedes, Rt. Hn. W. F. (Ashford)
Higgins, Terence L.


Biffen, John
Digby, Simon Wingfield
Hiley, Joseph


Biggs-Davison, John
Dodds-Parker, Douglas
Hill, J. E. B.


Black, Sir Cyril
Doughty, Charles
Holland, Philip


Boardman, Tom (Leicester, S.W.)
du Cann, Rt. Hn. Edward
Hordern, Peter


Body, Richard
Elliot, Capt. Walter (Carshalton)
Hornby, Richard


Bossom, Sir Clive
Elliott, R.W.(N'c'tle-upon-Tyne,N)
Howell, David (Guildford)


Boyd-Carpenter, Rt. Hn. John
Errington, Sir Eric
Hunt, John


Boyle, Rt. Hn. Sir Edward
Eyre, Reginald
Hutchison, Michael Clark


Braine, Bernard
Farr, John
Iremonger, T. L.


Brinton, Sir Tatton
Fisher, Nigel
Jenkin, Patrick (Woodford)


Brown, Sir Edward (Bath)
Fletcher-Cooke, Charles
Jopling, Michael


Bruce-Gardyne, J.
Fortescue, Tim
Joseph, Rt. Hn. Sir Keith


Bryan, Paul
Foster, Sir John
Kerby, Capt. Henry


Buchanan-Smith, Alick (Angus, N&amp;M)
Fraser, Rt. Hn. Hugh(St'fford &amp; Stone)
Kershaw, Anthony


Buck, Antony (Colchester)
Galbraith, Hn. T. G.
Kimball, Marcus


Bullus, Sir Eric
Gilmour, Sir John (Fife, E.)
King, Evelyn (Dorset, S.)


Campbell, B. (Oldham, W.)
Glover, Sir Douglas
Kirk, Peter


Campbell, Gordon (Moray &amp; Nairn)
Glyn, Sir Richard
Kitson, Timothy


Carr, Rt. Hn. Robert
Codber, Rt. Hn. J. B.
Lambton, Viscount


Channon, H. P. G.
Goodhew, Victor
Lancaster, Col. C. G.


Chataway, Christopher
Gower, Raymond
Legge-Bourke, Sir Harry




Lewis, Kenneth (Rutland)
Page, Graham (Crosby)
Stodart, Anthony


Lubbock, Eric
Page, John (Harrow, W.)
Stoddart-Scott, Col. Sir M.


McAdden, Sir Stephen
Pardee, John
Tapsell, Peter


Mac Arthur, Ian
Pearson, Sir Frank (Clitheroe)
Taylor, Edward M.(G'gow, Cathcart)


Maclean, Sir Fitzroy
Peel, John
Temple, John M.


Macleod, Rt. Hn. Iain
Percival, Ian
Thatcher, Mrs. Margaret


McMaster, Stanley
Pike, Miss Mervyn
Tilney, John


McNair-Wilson, Michael
Pink, R. Bonner
Turton, Rt. Mn. R. H.


McNair-Wilson, Patrick (NewForest)
Pounder, Rafton
van Straubenzee, W. R.


Maddan, Martin
Powell, Rt. Hn. J. Enoch
Viewers, Dams Joan


Maginnis, John E.
Price, David (Eastleigh)
Waddington, David


Marples, Rt. Hn. Ernest
Prior, J. M. L.
Wainwright, Richard (Colne Valley)


Marten, Neil
Pym, Francis
Walker, Peter (Worcester)


Maude, Angus
Quennell, Miss J. M.
Walker-Smith, Rt. Hn. Sir Derek


Mawby, Ray
Ramsden, Rt. Hn. James
Walters, Dennis


Maxwell-Hyslop, R. J.
Rawlinson, Rt. Hn. Sir Peter
Ward, Dame Irene


Mills, Peter (Torrington)
Rhys Williams, Sir Brandon
Wells, John (Maidstone)


Mills, Stratton (Belfast, N.)
Ridsdale, Julian
Whitelaw, Rt. Hn. William


Miscampbell, Norman
Rossi, Hugh (Hornsey)
Wiggin, A. W.


Mitchell, David (Basingstoke)
Royle, Anthony
Williams, Donald (Dudley)


Montgomery, Fergus
Russell, Sir Ronald
Wilson, Geoffrey (Truro)


Morgan-Giles, Rear-Adm.
St. John-Stevas, Norman
Winstanley, Dr. M. P.


Morrison, Charles (Devizes)
Scott, Nicholas
Wolrige-Gordon, Patrick


Mott-Radclyffe, Sir Charles
Scott-Hopkins, James
Wood, Rt. Hn. Richard


Monro-Lucas-Tooth, Sir Hugh
Sharples, Richard
Woodnutt, Mark


Murton, Oscar
Shaw, Michael (Sc'b'gh &amp; Whitby)
Worsley, Marcus


Nabarro, Sir Gerald
Silvester, Frederick
Younger, Hn. George


Neave, Alrey
Sinclair, Sir George



Noble, Rt. Hn. Michael
Smith, Dudley (W'wick &amp; L'mington)
TELLERS FOR THE AYES:


Onslow, Cranley
Smith, John (London &amp; W'minster)
Mr. Jasper More and Mr. Bernard Weatherill.


Orr, Capt. L. P. S.
Speed, Keith



Osborne, Sir Cyril (Louth)
Stainton, Keith





NOES


Albu, Austen
Delargy, Hugh
Hart, Rt. Hn. Judith


Allaun, Frank (Salford, E.)
Dell, Edmund
Haseldine, Norman


Alldritt, Walter
Dempsev, James
Hattersley, Roy


Anderson, Donald
Dewar, Donald
Hazell, Bert


Armstrong, Ernest
Diamond, Rt. Hn. John
Heffer, Eric S.


Ashley, jack
Dickens, James
Henig, Stanley


Ashton, Joe (Bassetlaw)
Dobson, Ray
Hilton, W. S.


Atkins, Ronald (Preston, N.)
Doig, Peter
Hooley, Frank


Atkinson, Norman (Tottenham)
Driberg, Tom
Houghton, Rt. Hn. Douglas


Bacon, Rt. Hn. Alice
Dunn, James A.
Howarth, Robert (Bolton, E.)


Barnett, Joel
Dunwoody, Mrs. Gwyneth (Exeter)
Howie, W.


Beaney, Alan
Dunwoody, Dr. John (F'th &amp; C'b'e)
Hoy, Rt. Hn. James


Bence, Cyril
Eadie, Alex
Hughes, Rt. Hn. Cledwyn (Anglesey)


Benn, Rt. Hn. Anthony Wedgwood
Edelman, Maurice
Hughes, Hector (Aberdeen, N.)


Bidwell, Sydney
Edwards, Robert (Bilston)
Hughes, Roy (Newport)


Binns, John
Edwards, William (Merioneth)
Hunter, Adam


Bishop, E. S.
Ellis, John
Irvine, Sir Arthur (Edge Hill)


Blackburn, F.
English, Michael
Jackson, Colin (B'h'se &amp; Spenb'gh)


Boardman, H. (Leigh)
Ennals, David
Jackson, Peter M. (High Peak)


Bottomley, Rt. Hn. Arthur
Ensor, David
Jay, Rt. Hn. Douglas


Boyden, James
Evans, Fred (Caerphilly)
Jeger, Mrs. Lena (H'b'n&amp;St.P'cras.S.)


Bradley, Tom
Evans, loan L. (Birm'h'm, Yardley)
Jenkins, Hugh (Putney)


Bray, Dr. Jeremy
Faulds, Andrew
Jenkins, Rt. Hn. Roy (Stechford)


Brown, Hugh D. (G'gow, Provan)
Fernyhough, E.
Johnson, Carol (Lewisham, S.)


Brown,Bob(N'c'tle-upon-Tyne,W.)
Finch, Harold
Johnson, James (K'ston-on-Hull, W.)


Brown, R. W. (Shoreditch &amp; F'bury)
Fletcher,Rt.Hn.Sir Eric(Islington,E.)
Jones, Dan (Burnley)


Buchan, Norman
Fletcher, Raymond (Ilkeston)
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)


Buchanan, Richard (G'gow, Sp'burn)
Fletcher, Ted (Darlington)
Jones, J. Idwal (Wrexham)


Butler, Herbert (Hackney, C.)
Foley, Maurice
Jones, T. Alec (Rhondda, West)


Butler, Mrs. Joyce (Wood Creen)
Foot, Michael (Ebbw Vale)
Judd, Frank


Cant, R. B.
Forrester, John
Kelley, Richard


Carmichael, Neil
Fowler, Gerry
Kenyon, Clifford


Carter-Jones, Lewis
Fraser, John (Norwood)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Chapman, Donald
Freeson, Reginald
Kerr, Russell (Feltham)


Concannon, J. D.
Galpern, Sir Myer
Lawson, George


Conlan, Bernard
Gardner, Tony
Leadbitter, Ted


Craddock, George (Bradford, S.)
Garrett, W. E.
Lee, Rt. Hn. Frederick (Newton)


Crawshaw, Richard
Ginsburg, David
Lee, Rt. Hn. Jennie (Cannock)


Cronin, John
Gray, Dr. Hugh (Yarmouth)
Lee, John (Reading)


Crosland, Rt. Hn. Anthony
Gregory, Arnold
Lever, Rt. Hn. Harold (Cheetham)


Crossman, Rt. Hn. Richard
Grey, Charles (Durham)
Lewis, Arthur (W. Ham, N.)


Dalyell, Tam
Griffiths, David (Rother Valley)
Lewis, Ron (Carlisle)


Darling, Rt. Hn. George
Griffiths, Eddie (Brightside)
Lomas, Kenneth


Davidson, Arthur (Accrington)
Griffiths, Will (Exchange)
Loughlin, Charles


Davies, G. Elfed (Rhondda, E.)
Hamilton, James (Bothwell)
Luard, Evan


Davies, Dr. Ernest (Stretford)
Hamilton, William (Fife, W.)
Mabon, Dr. J. Dickson


Davies, Rt. Hn. Harold (Leek)
Hamling, William
McBride, Neil


Davies, Ifor (Cower)
Hannan, William
McCann, John


de Freitas, Rt. Hn. Sir Geoffrey
Harrison, Walter (Wakefield)
MacColl, James







Macdonald, A. H.
Oram, Albert E.
Slater, Joseph


McGuire, Michael
Orbach, Maurice
Small, William


McKay, Mrs. Margaret
Orme, Stanley
Spriggs, Leslie


Mackenzie, Gregor (Rutherglen)
Oswald, Thomas
Steel, David (Roxburgh)


Mackintosh, John P.
Owen, Dr. David (Plymouth, S'tn)
Stonehouse, Rt. Hn. John


Maclennan, Robert
Owen, Will (Morpeth)
Strauss, Rt. Hn. G. R.


MacMillan, Malcolm (Western Isles)
Page, Derek (King's Lynn)
Taverne, Dick


McMillan, Tom (Glasgow, C.)
Palmer, Arthur
Thomas, Rt. Hn. George


McNamara, J. Kevin
Pannell, Rt. Hn. Charles
Thomson, Rt. Hn. George


Mahon, Peter (Preston, S.)
Park, Trevor
Tinn, James


Mahon, Simon (Bootle)
Parker, John (Dagenham)
Tuck, Raphael


Mallalieu, J.P.W.(Huddersfield,E.)
Parkyn, Brian (Bedford)
Urwin, T. W.


Manuel, Archie
Pavitt, Laurence
Varley, Eric G.


Mapp, Charles
Pearson, Arthur (Pontypridd)
Wainwright, Edwin (Dearne Valley)


Marquand, David
Pentland, Norman
Walker, Harold (Doncaster)


Mason, Rt. Hn. Roy
Perry, Ernest G. (Batteraea, S.)
Wallace, George


Maxwell, Robert
Perry, George H. (Nottingham, S.)
Watkins, David (Consett)


Mellish, Rt. Hn. Robert
Prentice, Rt. Hn. Reg
Watkins, Tudor (Brecon &amp; Radnor)


Mendelson, John
Price, Christopher (Perry Bar)
Weitzman, David


Mikardo, Ian
Price, Thomas (Westhoughton)
Wellbeloved, James


Millan, Bruce
Price, William (Rugby)
Whitaker, Ben


Miller, Dr. M. S.
Probert, Arthur
Whitlock, William


Milne, Edward (Blyth)
Rankin, John
Wilkins, W. A.


Mitchell, R. C. (S'th'pton, Test)
Rees, Merlyn
Willey, Rt. Hn. Frederick


Molloy, William
Richard, Ivor
Williams, Alan (Swansea, W.)


Moonman, Eric
Roberts, Albert (Normanton)
Williams, Alan Lee (Hornchurch)


Morgan, Elystan (Cardiganshire)
Roberts, Gwilym (Bedfordshire, S.)
Williams, Clifford (Abertillery)


Morris, Alfred (Wythenshawe)
Robinson, Rt.Hn.Kenneth(St.P'c'as)
Williams, Mrs. Shirley (Hitchin)


Morris, Charles R. (Openshaw)
Rodgers, William (Stockton)
Willis, Rt. Hn. George


Morris, John (Aberavon)
Ross, Rt. Hn. William
Wilson, William (Coventry, S.)


Moyle, Roland
Ryan, John
Winnick, David


Mulley, Rt. Hn. Frederick
Shaw, Arnold (Ilford, S.)
Woodburn, Rt. Hn. A.


Murray, Albert
Sheldon, Robert
Woof, Robert


Neal, Harold
Shore, Rt. Hn. Peter (Stepney)



Newens, Stan
Short, Rt. H n. Edward(N' c' tle-u-Tyne)
TELLERS FOR THE NOES:


Oakes, Gordon
Silkin, Rt. Hn. John (Deptford)
Mr. Alan Fitch and Mr. Joseph Harper.


Ogden, Eric
Silkin, Hn. S. C. (Dulwich)



O'Malley, Brian
Silverman, Julius

New Clause 9

STAMP DUTY-EXEMPTION FOR OBJECTS OF NATIONAL, SCIENTIFIC, HISTORIC, OR ARTISTIC INTEREST

No stamp duty shall be chargeable on any instrument whereby any property or any estate or interest in any pictures, prints, books, manuscripts, works of art or scientific collections as appear to the Treasury to be of national, scientific, historic or artistic interest and such property is for national purposes transferred to or vested in any university or any county council or municipal corporation.—[Mr. Chanson.]

Brought up, and read the First time.

Mr. H. P. G. Channon: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker (Mr. Sydney Irving): With this new Clause the House may also discuss new Clause No. 38—"Exemption of charities from the payment of stamp duty on the purchase of property and mortgages."

Mr. Channon: This Clause deals with a smaller matter than betterment levy but still an important matter in regard to stamp duty. It is primarily designed to deal with an anomaly which has been drawn to my attention by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin). I have seen a letter from the Financial Secretary to the Treasury dealing with this point. I will leave it to my hon. Friend the Member for Acton (Mr. Kenneth Baker) to deal with new Clause 38, should he be successful in catching the eye of the Chair.
As the law stands, stamp duty must be paid on documents such as share certificates required in relation to gifts intervivos. No stamp duty is payable on simple gifts of movable objects which do not require a document. Were I to give the Minister of State a picture or a collection of books, neither of us would have to pay stamp duty. If, on the other hand, I were to give him-—unlikely event—some I.C.I. shares, stamp duty would have to be paid.
Whenever appropriate, we ought to encourage gifts to universities and museums by public-spirited people, and when they are prepared to allow the fruits of their scholarship and knowledge, perhaps over

many years, to be shared by the nation, any barrier to such gifts must, prima facie, be a mistake. Many of our greatest national collections have been built up in that way.
10.30 p.m.
If gifts have to be made in the form of a settlement, stamp duty is payable. However, a special concession was made in the Finance (1909–10) Act, 1910, which provided that in the case of certain conveyances or transfers, where the property was to be held, among other reasons,
for the purposes of its preservation for the benefit of the nation 
stamp duty was remitted.
There is, however, an extraordinary anomaly which arises in cases if this kind. I refer here to the case of a man known to Treasury Ministers—I shall not give his name, but the Financial Secretary has written about the matter to my hon. Friend—who made an extremely generous settlement of a magnificent collection of books worth a considerable sum of money. The major portion of the collection, going back to the 12th century, has been left to the British Museum. The remainder, of which the British Museum already had copies, are to go under the settlement to the new University of Ulster. All will agree that this is a most public-spirited gift which will be of great benefit to the institutions concerned and to the country. However, the donor has been advised that stamp duty is payable on the second gift to the University of Ulster. It is not payable in respect of that part of the settlement going to the British Museum.
The reason for the anomaly is that the University of Ulster is set up under Royal Charter, as most—if not all—universities are, whereas the British Museum is incorporated by Act of Parliament and is specifically exempt under Section 74 of the 1910 Act.
That distinction is now totally out of date. It is nonsense. How can it be justified that a settlement in favour of the British Museum is exempt from stamp duty whereas a settlement in favour of a new university is not?
The gift to which I have referred is a substantial one and the stamp duty is a considerable item. I have seen a letter from the University of Ulster—I know


that my hon. Friend the Member for Londonderry (Mr. Chichester-Clark) is concerned about the matter—confirming that members of the public will have access to this magnificent collection of books.
The case that they are being preserved for the benefit of the nation is amply proved. The university says in its letter that
many of these books are unique, and all of them are very valuable",
and it says at the same time that the public will have access to them.
The settlement has been made in consultation with the British Museum authorities, with the Friends of the National Libraries, and I understand that the Treasury Solicitor also was involved. This one case shows that the present law on the matter is archaic and must be changed. It must be changed in the interest of the universities themselves because the law as it stands must act as a disincentive to people who wish to make such gifts.
Accordingly, we propose by new Clause 9 to give the Treasury power—it is at the discretion of the Treasury—to say that
No stamp duty shall be chargeable on any instrument whereby any property or any estate or interest in any pictures, prints, books, manuscripts, works of art or scientific collections as appear to the Treasuy to be of national, scientific, historic or artistic interest and such property is for national purposes transferred to or vested in any university …
Any fair-minded person would say that that is wholly reasonable, and that the Treasury might consider making a concession. If it will not do it this year it might at any rate say that it will consider looking at the matter sympathetically in the future.
However, I have seen a letter of 15th July from the Financial Secretary to my hon. Friend the Member for Wanstead and Woodford, and I much regret that he says in it:
I do not think it would be right to attempt a new definition of cases falling outside the charge in Section 74, which would inevitably move from the clear purpose of the present law in order to cover the kind of disposition which would ordinarily be outside the ambit of the stamp duty legislation, but which attracts liability because of the methods adopted in particular cases for making the disposition.

The Treasury might go a bit further tonight. The change would not cost it any revenue. The law is totally indefensible; a clear anomaly exists. I have already put one clear case where it will make a substantial difference, and I am certain that others will arise.
I hope that the Treasury will reconsider the matter. The law is completely out of date. I am sure that some exemption of the kind I suggest will be allowed in time, and I hope that the Minister will say that he will give the matter favourable consideration, so that people will not be inhibited from making settlements in favour of the new universities, or bodies of this kind, which will attract stamp duty merely because of the anomaly that they are set up by Royal Charter and not an Act of Parliament.
The existing law is an out-of-date provision in a Finance Act of 50 years ago, passed when the sponsors no doubt had on their minds other matters than the wording of that Section. I beg the Minister to look at the anomaly again, and to give us a favourable answer tonight.

Mr. Kenneth Baker: New Clause 38 concerns the tax position of charities. Their tax position is very complicated, but by and large they do not pay taxes of any sort, though the statement should be heavily qualified. For example, they pay S.E.T., but get it back. On the whole, they are not liable to corporation tax or income tax, nor in most cases are they liable to capital gains tax. But I qualify all those statements because there are so many different types of charity.
One tax to which it is clear that they are liable is stamp duty, which is a tax on the transfer of capital assets. There are many charities springing up which buy houses and convert them, as Shelter does. They must pay stamp duty on the purchase of the house and on the negotiation of the mortgage. A case in my constituency brought this matter to my attention. There is a charitable society in Acton called the Abbeyfield Society, which buys Victorian houses and converts them, with money which it collects with great difficulty in my constituency and others, for elderly people who would otherwise be left high and dry in private rented accommodation. That is one of the greatest areas of housing suffering and shortage in this country.
This society 'has great difficulty in getting money together. It has just bought a house for £7,000 on which it has had to pay £70 stamp duty. It has also had to negotiate the mortgage with the local council. The Controller of Stamps insists that the mortgage be stamped at 10s. per cent. for £7,000. This is an anomaly under the 1967 Act. I do not believe that it was the intention of the Government in the 1967 Finance Act, or the intention of any previous Administration, to impose taxes of this sort upon charities of this kind.
'The extra amount involved in buying this house and converting it is something like £100. That, to a charity which has to equip the house with beds, bedding, carpets and chairs, is quite a lot of money. I hope that this narrow but important point will be sympathetically received by the Government. A lot of money cannot be involved here and we should not discourage any charitable effort, particularly that which is directed towards easing our housing problems.

Earl of Dalkeith: I want to support my hon. Friend the Member for Acton (Mr. Kenneth Baker) because there is in my constituency an organisation doing valuable work in housing elderly people. The cost to the Treasury of implementing the Amendment would be very small. Can the Minister tell us what loss of revenue would arise? The amount of good the Amendment will do is enormous.

Mr. John Smith: These two new Clauses do not go far enough. This is a most capricious and antiquated tax, only suited to primitive communities, such as we are rapidly becoming. It was introduced in 1694 as a temporary war-time tax—a phrase we have heard before. It is older than the window tax, older than the tax on liveried male servants, older than the tax on salt and older than the Inland Revenue itself. I remember recently the astonishment of an American company with which I had something to do, which purchased an English company. It received the document evidencing the purchase with no fewer than 43 stamps impressed on top of the wording varying in value from £50,000 to 4d.
I have paid a happy visit to the Stamp Duty Office, in the arches underneath

Somerset House. There can be found charming people operating the most charming old machines, and it seems a shame to bring anything so cosy to an end; but there is a difference between protecting the Revenue and protecting the jobs of those who are in the Revenue.
The tax has other disadvantages, which is why I want to widen these Clauses.

Mr. Deputy Speaker: Order. The hon. Gentleman cannot go wider than the new Clauses.

Mr. Smith: I had hoped that since this is a Second Reading debate I might broaden the new Clauses a little. Even as they stand it is not possible to tell how much this duty raises, since it can be paid through sticking postage stamps on documents. There are 350 separate relevant law cases dealing with stamp duty, and no consolidation has taken place for the last 77 years. I will refer briefly to how this affects banks. Nine million pounds is raised by counting 1,100 million separate pieces of paper each year.

Mr. Deputy Speaker: Order. The hon. Gentleman cannot debate the whole issue of stamp duty on these new Clauses.

Mr. Smith: Even the purposes for which these new Clauses are designed, namely, to exempt from stamp duty a very wide range of transactions—works of art and kindred—

Mr. Deputy Speaker: Order. If the hon. Gentleman keeps within the scope of the objects set out in the new Clauses he will be perfectly in order. He has been going much wider than that.

Mr. Smith: In the matter of stamp duty we can learn a great deal from many countries, including Greece and South Africa. Even for the matters in these new Clauses there are 171 different rates and categories of stamp duty—

Mr. Deputy Speaker: Is the hon. Gentleman saying that there are 171 different rates on the objects mentioned in the new Clauses? Unless he is, he is out of order.

10.45 p.m.

Mr. Smith: Mr. Deputy Speaker, I have no wish to cross swords with you. New Clause 38 seeks to exempt charities from stamp duty, and they are, of course,


subject to stamp duty at present in the same way as are ordinary citizens on all transactions which normally attract stamp duty.
For example, there are 32 different categories of stamp duty on leases, the smallest of which raises 1s. and the largest only £12. Furthermore, the documents must be taken to the Stamp Office and one has to queue up to get the stamp put on.
Not unnaturally, the cost of raising this revenue, be it from objects of art or from charities, is very much higher proportionately than the cost of raising any other tax, and particularly high when it comes to repaying the tax on documents which have been wrongly stamped. One million pounds is repaid annually for documents which have been wrongly stamped, and it is mostly repaid in amounts of 2d.
The removal of stamp duty was advocated by the Bland Committee. The only person who has ever done anything about this barbaric tax, invented in the days when everybody was so slippery that pieces of paper were the only things that one could get hold of, and of which we should be ashamed, was Sir Stafford Cripps, who abolished the 1d. stamp duty on proxies. I hope that the time has now come when we can march forward from that point and abolish stamp duty on a much wider range of transactions.

The Minister of State, Treasury (Mr. Dick Taverne): The new Clauses raise considerable difficulties, and it is not on grounds of cost that they are being resisted. I must tell the hon. Member for Edinburgh, North (Earl of Dalkeith) that I cannot say what the exact cost would be. It is the innate difficulties of the course proposed that lead me to advise the House to reject the two new Clauses.
I shall not follow the hon. Member for Cities of London and Westminster (Mr. John Smith) into his historical researches on the tax in general, but I shall turn first to new Clause 38, because this is the wider of the two new Clauses and entails looking at the nature of stamp duty and the reasons why we cannot follow the course suggested.
Stamp duties are taxes on documents, or on transactions to which the documents give effect, and are determined by the character and size of the transactions and not in general by the status of the parties who take part in the transactions. This is shown by the fact that relief is given for small transactions. For small transactions in certain classes of property no account is taken of whether the person who pays the tax is rich or poor. In this sense there is a division between taxes like income tax which have regard to the status of the payers and those like purchase tax and customs duty and, generally speaking, stamp duty, which look at the thing and disregard the circumstances and status.
The first objection to the wider new Clause which the hon. Member has promoted is that exactly the same kind of pressure for relief to look at status would inevitably be generated in taxes like purchase tax and customs duties.
Stamp duty on property means an addition to the price. The hon. Member is suggesting that charities should be in a more favourable position in acquiring property because they would be able to acquire it more cheaply than could their competitors, and charities are not generally regarded——

Mr. John Smith: But that was the case many years ago when the generality paid 2 per cent. and charities only 1 per cent. That will not wash.

Mr. Taverne: In 1947 there was a temporary exemption, when the rate became 2 per cent., and several courses were not open to trustees which are now open to them, and the position is different.
The hon. Gentleman says that the status of the parties is disregarded in the case of stamp duty but not in the case of income tax. In the case of charities generally, it would not be a desirable consequence if they could buy property more cheaply than could their competitors because they would not be subject to duty, but a more important objection is that the Clause ties it to the use to which the property would be put. It says:
that property is to be used exclusively for a charitable purpose, or on any mortgages arranged on properties owned by Charities and used for charitable purposes.


I am sure that the hon. Member for Acton (Mr. Kenneth Baker) will realise that it is an unsatisfactory basis for imposing stamp duty, as for purchase tax, if one has to have regard to the use to which the property may subsequently be put.

Mr. Kenneth Baker: The Clause was not an elaborate method of tax avoidance or duty avoidance and we tried to pin it down to the purposes for which a house was to be bought by charities and to prevent the sort of fringe charities dealing in property. It is intended to benefit only genuine charitable houses bought by charities for the needy. Surely the hon. and learned Member's arguments are unsatisfactory. Charities like these do not have competitors. They are not buying properties more cheaply than the rest of the market. This is an unsatisfactory case.

Mr. Taverne: There are two separate arguments. One does not want to put charities in a position where they can buy properties more cheaply than others.

Hon. Members: Why not?

Mr. Taveme: The Clause suggests that one must have regard to the use to which a property is to be put and one would need to be sure it would be the use to which it will be put at the time the stamp duty becomes payable.
The other new Clause, in the name of the hon. Member for Southend, West (Mr. Channon), deals with a particular case of a settlement of a collection of books. As he pointed out, clearly this kind of object would not bear stamp duty usually, because it would be passing in a different way, without documents, and it was only because a settlement was involved and a gift passed, that stamp duty became payable. He puts it that there were anomalies in the case of a gift to the British Museum which is incorporated by special Act, and no stamp duty is payable, as it is in the case of a university.
The exceptions under the 1910 Act is very limited and is primarily concerned with the gift of land to the National Trust, or similar transactions. It so happens that the words were wide enough to cover the settlement of books on the British Museum. It is not so much an anomaly which arises for the settlement to the universities having to bear the

stamp duty; it is a rather fortuitous circumstance that the gift to the British Museum should come under the terms of Section 74 of the 1910 Act.
It may be asked: why not widen the exemption under Section 74 of the 1910 Act to include the kind of cases which have been put forward? But if this was done it would create a more serious anomaly than arises now. We would then say that there should be no such exemption for conveyances of property to charitable or public bodies, even if there might be an exemption from estate duty, but that there should be relief in the case of books or works of art where normally there would be no stamp duty payable because it would be done without a settlement. In this case the method of making the gift requires such an instrument. So we would have an anomaly in that there would be no relief if land or a house was given to a university, a public body of a charity, but there would be relief in the case of books and works of art. This would be legislation dealing with one particular case. I think that the House should always be cautious of legislating for one particular case. Looking at the general result, we would create a position which would be far more anomalous than that created by the limited exemption under Section 74 of the 1910 Act.

Mr. Robert Cooke: The reply on both the new Clauses has been, extraordinarily disappointing. The reasons given are not wholly convincing to me, and I know that I speak for my right hon. and hon. Friends on this side. I hope that, having shut the door this time, the Government will take note of what has been said and will see whether they can be more helpful in future.
My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) told us of the anomalies in the stamp duty. The whole thing is absolutely riddled with anomalies. One can give away an estate worth £1 million over a 10s. stamp and it can be legal in certain circumstances. Yet, in other circumstances, one is caught in the biggest possible way.
Concerning new Clause 9, I was most disappointed that the Minister was unable to make any suggestion about how this difficulty could be got over. There must be other cases which will occur in


future where university libraries and similar collections will lose as a result of the anomaly. It is likely that collections will go abroad rather than be given to libraries here. They may indeed be broken up. That is another unhappy circumstance which could occur. There is a positive disincentive to form such collections in future.
We have tried to impress upon the Government before that the great collections which have been formed in the past are unlikely to go on being formed in future with all the difficulties which are put in their way.
It is significant that the right hon. Lady, the Lady Bountiful, the patron of
the arts, the Minister in charge of the comparatively lavish patronage of the arts which the Government have gone in for, albeit in a sort of social service kind of way, should be present. I am sure that she is concerned about this difficulty that we are trying to get over. I hope that the fact that she is here means that she is not very happy about the situation and that she will press her right hon. and hon. Friends to accept the spirit of the new Clause.
There is definitely a loss to a learned body here and a loss to the public. The Minister has said that this difficulty cannot be got round on this occasion and it is no good legislating about a particular case. But perhaps a loophole can be found. Perhaps it can be sold for a nominal sum. Certainly it could be sold

to somebody else for a nominal sum and there would not be any question of stamp duty, but the university would get it

I remain unconvinced. The Government have not tried very hard. I hope that they will try harder in future.

Mr. Channon: I think that many hon. Members will be disappointed at the Government's reaction to these Clauses. My hon. Friend the Member for Acton (Mr. Kenneth Baker) referred to the Government's extraordinary attitude that this was desirable but administratively inconvenient. The Government's attitude to charities is astonishing.
The Minister argued that the British Museum should no longer have the right to acquire books or works of art without paying stamp duty. The anomaly was to be rectified by removing privileges given to the British Museum, rather than by enlarging them for the new universities. I cannot believe that the Government want people who make gifts of books to universities and institutions of learning to have to pay stamp duty on those books. It seems fantastic that the Government should wish to perpetuate this archaic and anomalous position, and I hope that my right hon. and hon. Friends will show that they are totally dissatisfied with the Minister's reply by taking the matter to a Division.

Question put, That the Clause be read a Second time:—

The House divided: Ayes, 195, Noes 241.

Division No. 330.]
AYES
[11.0 p.m.


Alison, Michael (Barkston Ash)
Brown, Sir Edward (Bath)
d'Avigdor-Goldsmid, Sir Henry


Allason, James (Hemel Hempstead)
Bruce-Gardyne, J.
Deedes, Rt. Hn. W. F. (Ashford)


Amery, Rt. Hn. Julian
Bryan, Paul
Dodds-Parker, Douglas


Astor, John
Buchanan-Smith, Alick (Angus, N&amp;M)
Doughty, Charles


Atkins, Humphrey (M't'n &amp; M'd'n)
Buck, Antony (Colchester)
du Cann, Rt. Hn. Edward


Awdry, Daniel
Bullus, Sir Eric
Elliot, Capt. Walter (Carshalton)


Baker, Kenneth (Acton)
Campbell, B. (Oldham, W.)
Elliott, R.W.(N'c'tle-upon.Tyne, N.)


Baker, W. H. K. (Banff)
Campbell, Gordon (Moray &amp; Nairn)
Emery, Peter


Barber, Rt. Hn. Anthony
Carr, Rt. Hn. Robert
Eyre, Reginald


Beamish, Col. Sir Tufton
Channon, H. P. G.
Farr, John


Bell, Roxald
Chataway, Christopher
Fisher, Nigel


Bennett, Sir Frederic (Torquay)
Chichester-Clark, R.
Fletcher-Cooke, Charles


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Clark, Henry
Fortescue, Tim


Berry, Hn. Anthony
Clegg, Walter
Foster, Sir John


Bessell, Peter
Cooke, Robert
Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)


Biffen, John
Cooper-Key, Sir Neill
Galbraith, Hn. T. G.


Biggs-Davison, John
Corfield, F. V.
Gibson-Watt, David


Black, Sir Cyril
Costain, A. P.
Gilmour, Sir John (Fife, E.)


Boardman, Tom (Leicester, S.W.)
Crouch, David
Glover, Sir Douglas


Body, Richard
Cunningham, Sir Knox
Glyn, Sir Richard


Bossom, Sir Clive
Currie, G. B. H.
Godber, Rt. Hn. J. B.


Boyd-Carpenter, Rt. Hn. John
Dalkeith, Earl of
Goodhew, Victor


Boyle, Rt. Hn. Sir Edward
Dance, James
Gower, Raymond


Brinton, Sir Tatton
Davidson, James (Aberdeenshire, W.)
Grieve, Percy




Griffiths, Eldon (Bury St. Edmunds)
Maude, Angus
Scott-Hopkins, James


Crimond, Rt. Hn. J.
Mawby, Ray
Sharples, Richard


Curden, Harold
Maxwell-Hyslop, R. J.
Shaw, Michael (Sc'b'gh &amp; Whitby)


Hall, John (Wycombe)
Mills, Peter (Torrington)
Silvester, Frederick


Hall-Davis, A. G. F.
Mills, Stratton (Belfast, N.)
Sinclair, Sir George


Hamilton, Michael (Salisbury)
Miscampbell, Norman
Smith, Dudley (W 'wick &amp; L'mington)


Harrison, Brian (Maldor.)
Mitchell, David (Basingstoke)
Smith, John (London &amp; W 'minster)


Harvey, Sir Arthur Vere
Montgomery, Fergus
Speed, Keith


Harvie Anderson, Miss
Morgan-Giles, Rear-Adm.
Stainton, Keith


Hawkins, Paul
Morrison, Charles (Devizes)
Steel, David (Roxburgh)


Hay, John
Munro-Lucas-Tooth, Sir Hugh
Stodart, Anthony


Heseltine, Michael
Murton, Oscar
Stoddart-Scott Col. Sir M.


Higgins, Terence L.
Nabarro, Sir Gerald
Tapsell, Peter


Hiley, Joseph
Neave, Airey
Taylor,Edward M.(G'gow,Cathcart)


Hill, J. E. B.
Noble, Rt. Hn. Michael
Temple, John M.


Holland, Philip
Nott, John
Thatcher, Mrs Margaret


Hordern, Peter
Onslow, Cranley
Tilney, John


Hornby, Richard
Orr, Capt. L. P. S.
Turton, Rt. Hn. R. H.


Howell, David (Guildford)
Page, Graham (Crosby)
van Straubenzee, W. R.


Hunt, John
Page, John (Harrow, W.)
Vickers, Dame Joan


Hutchison, Michael Clark
Pardoe, John
Waddington, David


Iremonger, T. L,
Pearson, Sir Frank (Clitheroe)
Wainwright, Richard (Colne Valley)


Jenkin, Patrick (Woodford)
Peel, John
Walker, Peter (Worcester)


Jopling, Michael
Percival, Ian
Walker-Smith, Rt. Hn. Sir Derek


Joseph, Rt. Hn. Sir Keith
Pike, Miss Mervyn
Walters, Dennis


Kerby, Capt. Henry
Pink, R. Bonner
Ward, Dame Irene


Kershaw, Anthony
Pounder, Rafton
Weatherill, Bernard


King, Evelyn (Dorset, S.)
Powell, Rt. Hn. J. Enoch
Wells, John (Maidstone)


Kirk, Peter
Price, David (Eastleigh)
Whitelaw, Rt. Hn. William


Kitson, Timothy
Prior, J. M. L.
Wiggin, A. W.


Lancaster, Col. C. G.
Pym, Francis
Williams, Donald (Dudley)


Legge-Bourke, Sir Harry
Quennell, Miss J. M.
Wilson, Geoffrey (Truro)


Lewis, Kenneth (Rutland)
Ramsden, Rt. Hn. James
Winstanley, Dr M. P.


McAdden, Sir Stephen
Rawlinson, Rt. Hn. Sir Peter
Wolrige-Gordon, Patrick


MacArthur, Ian
Rees-Davies, W. R.
Wood, Rt. Hn. Richard


Maclean, Sir Fitzroy
Rhys Williams, Sir Brandon
Woodnutt, Mark


Macleod, Rt. Hn. Iain
Ridsdale, Julian
Worsley, Marcus


McNair-Wilson, Michael
Rossi, Hugh (Hornsey)
Younger, Hn. George


McNair-Wilson, Patrick (New Forest)
Royle, Anthony
TELLERS FOR THE AYES


Maddan, Martin
Russell, Sir Ronald
Mr. Jasper More add Mr. Anthony Grant.


Maginnis, John E.
St. John-Stevas, Norman



Marples, Rt. Hn. Ernest
Scott, Nicholas



Marten, Neil






NOES


Albu, Austen
Davies, G. Elfed (Rhondda, E.)
Gardner, Tony


Allaun, Frank (Salford, E.)
Davies, Dr. Ernest (Stretford)
Garrett, W. E.


Alldritt, Walter
Davies, Rt. Hn. Harold (Leek)
Gray, Dr. Hugh (Yarmouth)


Anderson, Donald
Davies, Ifor (Gower)
Gregory, Arnold


Armstrong, Ernest
de Freitas, Rt. Hn. Sir Geoffrey
Grey, Charles (Durham)


Ashley, Jack
Delargy, Hugh
Griffiths, David (Rother Valley)


Ashton, Joe (Bassetlaw)
Dell, Edmund
Griffiths, Eddie (Brightside)


Atkinson, Norman (Tottenham)
Dempsey, James
Griffiths, Will (Exchange)


Barnett, Joel
Dewar, Donald
Hamilton, James (Bothwell)


Beaney, Alan
Diamond, fit. Hn. John
Hamilton, William (Fife, W.)


Bence, Cyril
Dickens, James
Hamling, William


Benn, Rt. Hn. Anthony Wedgwood
Dobson, Ray
Hannan, William


Bidwell, Sydney
Doig, Peter
Harper, Joseph


Binns, John
Driberg, Tom
Harrison, Walter (Wakefield)


Bishop, E. S.
Dunn, James A.
Hart, Rt. Hn. Judith


Boardman, H. (Leigh)
Dunwoody, Mrs. Gwyneth (Exeter)
Haseldine, Norman


Booth, Albert
Dunwoody, Dr. John (F'th &amp; C'b'e)
Hattersley, Roy


Bottomley, Rt. Hn. Arthur
Eadie, Alex
Hazell, Bert


Boyclen, James
Edelman, Maurice
Heffer, Eric S.


Bray, Dr. Jeremy
Edwards, Robert (Bilston)
Henig, Stanley


Brown, Hugh D. (G'gow, Provan)
Edwards, William (Merioneth)
Hilton, W. S.


Brown,Bob(N'c'tte-upon-Tyne,W.)
Ellis, John
Hooley, Frank


Brown, R. W. (Shoreditch &amp; F'bury)
English, Michael
Houghton, Rt. Hn. Douglas


Buchan, Norman
Ennals, David
Howarth, Robert (Bolton, E.)


Buchanan, Richard (G'gow, Sp'burn)
Ensor, David
Howie, W.


Butler, Herbert (Hackney, C.)
Evans, Fred (Caerphilly)
Hoy, Rt. Hn. James


Butler, Mrs. Joyce (Wood Green)
Evans, Ioan L, (Birm'h'm, Yardley)
Hughes, Rt. Hn, Cledwyn (Anglesey)


Cant, R. B.
Faulds, Andrew
Hughes, Roy (Newport)


Carmichael, Neil
Fernyhough, E.
Hunter, Adam


Carter-Jones, Lewis
Finch, Harold
Irvine, Sir Arthur (Edge Hill)


Concannon, J. D.
Fletcher, Ted (Darlington)
Jackson, Colin (B'h'se &amp; Spenb'gh)


Conlan, Bernard
Foley, Maurice
Jackson, Peter M. (High Peak)


Crawshaw, Richard
Foot, Michael (Ebbw Vale)
Jay, Rt. Hn. Douglas


Cronin, John
Forrester, John
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)


Crosland, Rt. Hn. Anthony
Fowler, Gerry
Jenkins, Hugh (Putney)


Dalyell, Tam
Fraser, John (Norwood)
Jenkins, Rt. Hn. Roy (Stechford)


Davidson, Arthur (Accrington)
Freeson, Reginald
Johnson,Carol (Lewisham, S.)


Davies, Ednyfed Hudson (Conway)
Galpern, Sir Myer
Johnson, James (K'ston-on-Hull, W.)







Jones, Rt. Hn. Sir Elwyn(W. Ham,[...].)
Moonman, Eric
Rodgers, William (Stockton)


Jones, J. Idwal (Wrexham)
Morgan, Elystan (Cardiganshire)
Ross, Rt. Hn. William


Jones, T. Alec (Rhondda, w[...])
Morris, Alfred (Wythenshawe)
Shaw, Arnold (Ilford, S.)


Judd, Frank
Morris, Charles R. (Openshaw)
Sheldon, Robert


Kelley, Richard
Morris, John (Aberavon)
Shore, Rt. Hn. Peter (Stepney)


Kenyon, Clifford
Moyle, Roland
Short, Rt. Hn.Edward(N'c'Ne-u-Tyne)


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Mulley, Rt. Hn. Frederick
Silkin, Rt. Hn. John (Deptford)


Kerr, Russell (Feltham)
Murray, Albert
Silkin, Hn. S. C. (Dutwich)


Lawson, George
Neal, Harold
Silverman, Julius


Leadbitter, Ted
Newens, Stan
Slater, Joseph


Lee, Rt. Hn. Frederick (Newton)
Oakes, Gordon
Small, William


Lee, Rt. Hn. Jennie (Cannock)
Ogden, Eric
Spriggs, Leslie


Lee, John (Reading)
O'Malley, Brian
Summerskill, Hn. Dr. Shirley


Lever, Rt. Hn. Harold (Cheetham)
Oram, Albert E.
Taverne, Dick


Lewis, Arthur (W. Ham, N.)
Orbach, Maurice
Thomas, Rt. Hn. George


Lewis, Ron (Carlisle)
Orme, Stanley
Thomson, Rt. Hn. George


Lomas, Kenneth
Oswald, Thomas
Tinn, James


Loughlin, Charles
Owen, Dr. David (Plymouth, S'tn)
Urwin, T. W.


Luard, Evan
Owen, Will (Morpeth)
Varley, Eric G.


Mabon, Dr. J. Dickson
Page, Derek (King's Lynn)
Wainwright, Edwin (Dearne Valley)


McCann, John
Palmer, Arthur
Walker, Harold (Doncaster)


MacColl, James
Pannell, Rt. Hn. Charles
Wallace, George


Macdonald, A. H.
Park, Trevor
Watkins, David (Consett)


McGuire, Michael
Parker, John (Dagenham)
Watkins, Tudor (Brecon &amp; Radnor)


McKay, Mrs. Margaret
Parkyn, Brian (Bedford)
Weitzman, David


Mackenzie Gregor (Rutherglen)
Pavitt, Laurence
Wellbeloved, James


Mackintosh, John P.
Pearson, Arthur (Pontypridd)
Wells, William (Walsall, N.)


Maclennan, Robert
Pentland, Norman
Whitaker, Ben


McMillan, Tom (Glasgow, C.)
Perry, Ernest G. (Battersea, S.)
Whitlock, William


McNamara, J. Kevin
Perry, George H. (Nottingham, S.)
Willey, Rt. Hn. Frederick


Mahon, Peter (Preston, S.)
Prentice, Rt. Hn. Reg
Williams, Alan (Swansea, W.)


Mahon, Simon (Bootle)
Price, Christopher (Perry Barr)
Williams, Alan Lee (Hornchurch)


Mallalieu,J.P.W.(Huddersfield,E.)
Price, Thomas (Westhoughton)
Williams, Clifford (Abertillerv)


Manuel, Archie
Price, William (Rugby)
Williams, Mrs. Shirley (Hitchin)


Mapp, Charles
Probert, Arthur
Willis, Rt. Hn. George


Marquand, David
Rankin, John
Wilson, William (Coventry, S.)


Mason, Rt. Hn. Roy
Rees, Merlyn
Winnick, David


Mellish, Rt. Hn. Robert
Richard, Ivor
Woodbum, Rt. Hn. A.


Mendelson, John
Roberts, Albert (Normanton)
Woof, Robert


Mikardo, Ian
Roberts, Rt. Hn. Goronwy
TELLERS FOR THE NOES:


Miller, Dr. M. S.
Roberts, Gwilym (Bedfordshire, S.)
Mr. Alan Fitch and Mr. Neil McBride.


Milne, Edward (Blyth)
Robertson, John (Paisley)



Mitchell, R. C. (S'th'pton, Test)
Robinson, Rt.Hn. Kenneth (St.P'c'as)



Molloy, William

Further consideration of the Bill, as amended, adjourned.—[Mr. Roy Jenkins.]

Bill, as amended, to be further considered Tomorrow.

LAND COMMISSION (DEVELOPMENT VALUE ASSESSMENT)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Armstrong.]

11.11 p.m.

Mr. Bryant Godman Irvine: My constituent, Mr. Dutt, who lived for 14 years in Bromley, found that at the end of that 14 years he wanted to move, so he entered into negotiations, about which I am sure the Chief Secretary knows, and sold his house for £15,000. The situation in which he found himself was similar to that which applies to many houses in this country, in that his was one house in a square. All the houses round the square were occupied, and there was therefore no spare land which it would be possible to develop. There was no access into the land at the back, and the various people who occupied houses in the square had been approached and all had refused any prospect of development.
There was, in particular, the owner of a place called Turret House who had been asked whether she would allow it to be developed. She was a Mrs. Hodson, and she said:
Nobody can develop the overall site unless I sell half my garden to provide access. I have lived here 14 years and, as I love it, I have no intention of selling an inch.
So far as Mr. Dutt is concerned, that puts paid to the Land Commission's argument ".
A Mrs. Welch said:
All the residents are determined to act together to keep developers out.
Knowing how determined we are to preserve our homes, we feel sorry for Mr. Dutt, confr3nted with the bill. What worries us now is that we could be in the same boat if we wanted to move.
Everybody occupying premises around the square has said "No" to development. There was therefore no application by my constituent to the Bromley Council for development. When he decided to move he got a letter from the person purchasing his house which said that the purchaser would take the land for residence only. My constituent was assured that if this was the situation there would be no question of planning permission being granted, and also that he would not be liable for any charge,

but in due course he received an assessment saying that there was a sum of £4,000 for which he would be liable, out of the £15,000 he had received. Therefore he was assessed for £1,160.
So Mr. Dutt came to me, and I wrote a letter to the Minister. The Minister replied on 24th March, and in the course of his letter he said:
The levy is payable on what is known as the development value of land, which is the increase in value that comes with the prospect (which is not necessarily dependent upon there being planning permission) of putting the land to a new and more valuable use.
The situation as I see it is that nobody can be certain, when he sells a house in these circumstances, which are not unusual in this country, that he will not be encumbered later with an assessment for development value. It appears that nobody can sell a house with any certainty that a straightforward sale can be carried out without an assessment of this sort.
The second thing is that is my constituent had done everything he could. He made inquiries about what the position was to be so far as development value would be concerned. He was advised that without planning permission, which he had not got, he was not liable, and that if he did apply the application would be refused.
The third thing is that when the Daily Express dealt with this case it said that this was purely a tax on hope value, and if it is a tax on hope value, I cannot follow the reason why the assessment is not made at the time the development is taking place. My constituent moved out. He is not there. Nobody is developing his land. If at some future stage there could be development, which my constituent thinks impossible, why not charge the person who then has the land?
Having been presented with these facts, I then received a letter from a gentleman who lived in Carmarthen. He found himself in exactly the contrary position. In his case, he had a mother of 94 and he had land on the outskirts of Carmarthen ripe for development. In accordance with the views he held, it seemed to him that it would be possible for him to obtain an increased value for the land if he sold it, but he was not proposing to do so.
He said in his letter to me:
Some three years ago, under a compulsory order of the local authority, twin main sewerage pipes were laid across the centre of two fields owned by my mother (aged 94). These fields form the boundary of the town's southwestern perimeter. It is generally felt that these two fields now present themselves as a front-line proposition for development. Only yesterday, in an endeavour to expedite payment of compensation to my mother in respect of the laying of the main sewerage pipes, I was informed by an official of the District Valuer's staff that no compensation could be claimed for loss of development value as no outline planning consent had been sought or given for the fields in question. This line of reasoning, I feel, only aggravates the absurdity of the Land Commission's ' prospect value' in connection with Mr. Dutt's house sale. In Mr. Dutt's case, development prospects appear very remote, and the Land Commission demand blood money. In mother's case, development ' prospect value' is generally accepted as highly favourable but the Land Commission does not want to acknowledge this when it comes to compensatory circumstances. 'Prospect value' surely is an absurdity but, if the Land Commission cling to it, then it should work both ways.
So here we have my constituent, who has land for which he has not obtained and cannot obtain planning permission, being assessed for development value, and in Carmarthen we have a case where there is land which could, in the view of the owner, be ripe for development, and he is not allowed to claim for development value.
In these circumstances, I thought there was a matter which the Minister would like to explain to the House, and that is why I sought this debate.

11.20 p.m.

Mr. John Hunt: I am grateful to be able to speak in this debate, so rightly initiated by my hon. Friend the Member for Rye (Mr. Bryant Godman Irvine). I share his mystification at the operations of the Land Commission in the assessment of development value. The contrast which he has drawn between the two cases which he cited has highlighted the extremely ambiguous and anomalous position which appears to exist on development value. I am particularly concerned with the case of Mr. N. K. Dutt, who sold his house in my constituency for £15,000 to move to the equally salubrious and residential area of Rye. Then, out of the blue, and quite contrary to the legal advice which Mr. Dutt had received, came notification from the Land

Commission that, in its view, the property was worth not £15,000 but £11,000 and that the balance of £4,000 represented what it called expectation of development, on which betterment levy would be paid.
This assessment came as a bombshell not only to Mr. Dutt but to many other owner-occupiers in Bromley who might inadvertently be placed in the same position and face a levy demand of similar magnitude. What is particularly disturbing and outrageous in this case is that this assessment was made in spite of the facts that no planning application for development of the site had ever been submitted and that the Bromley Council had in any case said that in the event of any such application it would most certainly be refused.
So the case of Mr. Dutt has caused real consternation and anger in my constituency and, I believe, far beyond it. Many people there feel, as my hon. Friend and I feel, that if this levy is to be paid at all it should be paid by the person who eventually does the development, rather than the original owner, Mr. Dutt. So we are entitled to some guidance and assurance from the Minister. If this is forthcoming, this short debate will prove very worth while.

11.22 p.m.

The Minister for Planning and Land (Mr. Kenneth Robinson): In seeking an Adjournment debate on the practice of the Land Commission in assessing development value, the hon. Member for Rye (Mr. Bryant Godman Irvine) has chosen a topic which we have had many opportunities of debating in recent months—most recently, about one hour ago. I should like to pay tribute to the restrained way in which he made his case. I will not therefore spend long on a general exposition of how development value is assessed, for this is in any case a relatively simple matter, but I will deal in more detail with the way in which the current use value of land is ascertained, since I think it is this aspect of the levy calculation which is causing the hon. Gentleman some concern.
But, first, I would like to make one comment on the phraseology adopted by the hon. Member. It is that the Land Commission has no "practice" but to follow the law. To my mind, the word "practice" carries the implication that


one has chosen to follow a certain course, or that one is exercising one's discretion in a certain way. This is not the position in which the Land Commission finds itself in relation to betterment levy. It has no discretion in the way in which it applies the very tightly drawn code in the Land Commision Act. Clearly, there are some matters which it decides one way or another or values to which it may ascribe a higher or lower figure. But all these matters are subject to appeal before the Lands Tribunal, a body with a vast fund of experience of land values, or to the courts.
As I have said, I will deal only briefly with the way in which levy is assessed. First of all one starts with a top value. Where it is the sale of land which is being levied—and over 85 per cent. of all levy assessments are on the sale of land—the top value is the price for which the land has been sold, or, to use the legal jargon, the consideration. I will not pretend that it is always simple to ascertain the consideration for the sale of land. In a few cases other factors, such as a promise to do work, or an exchange of chattels, are involved and this requires some adjustment of the price paid. But in the great majority of cases there is no room for dispute about the top value where land is sold.
Where land is leased, the top value is ascertained by capitalising the annual rent and adding any premium that has begin paid. This is a common feature of valuation and again leaves little room for dispute. Where the levy charge results from land being developed, the top value is the value of the site for its new use. The determination of top value in these circumstances is a matter of valuation, and, of course, differences may arise between the levy payer and the Commission about the figure. But at least it can be said that the value derives from an actual use, whereas the more difficult figure to reach, that of current use value, must of necessity be based on negative assumptions.
Given a top value, development value is arrived at by deducting a base value. I think that it is now well known that this base value is either the price paid by the vendor for the land or its current use value plus a further one-tenth of the current use value added.
There are other allowances which may come into the calculation in certain circumstances—the levy payer may spend money which has increased the development value of his land; there is an allowance for costs of valuations involved in the levy calculation; and now, under the Finance Bill which we are debating this week., there will be an allowance for the cost of selling the land which is subject to levy.
Of all these matters, the one which is the most difficult to appreciate is the determination of current use value, and I will now comment on this. The current use value of the land is the value which the land would bring on the open market on the assumption that planning permission would not be granted for any material development. This means that in arriving at current use value the valuer may assume that it would be permissible to carry out the various small extensions or rebuilding works which would not themselves attract levy, but that he must also assume that any development which would attract levy would not be permitted.
This is the crux of the matter. Betterment levy is a charge on the added value which planning permiss, on or the prospect of it confers on land, and to arrive at this added value one must ascertain the value of the land both with and without the benefit or prospect of this permission.
I am, of course, well aware that the fact that levy is charged where there is a prospect of planning permission being granted is one feature of the scheme of levy which has provided the Press and some hon. Members with the opportunity to indulge in some lighthearted sarcasm.
But if levy were not taken in such circumstances, the scope for avoidance would be unlimited. In that event all a vendor need do to avoid levy would be to sell his land before getting planning permission to develop it. Furthermore, there is nothing unreal about the money which passes. The sale price, on which levy is assessed, is just as real whether or not there is planning permission.
In many cases the fact that planning permission to develop the land does not exist presents no problem to the valuer or the levy payer. Take, for example, the case of agricultural land sold to a building firm which expects that in the


course of a few years it will be able to secure permission to develop the land.
The local value of agricultural land as such will be apparent, within the normal limits of valuation, and any excess price paid is clearly the amount which the developer is prepared to invest against the chance of one day securing planning permission. As a result the landowner who is selling his agricultural land will have some levy to pay and, given the scheme of betterment levy, no one would deny that this is the sort of case in which levy is properly payable.
Difficulty arises where it is less apparent that a price is being paid which takes account of the fact that one day development of the land may be permitted. A person may, for example, buy, for a substantial amount, a plot of land for the purpose of extending his garden, with no intention of building on it. But it does not follow that he would have paid that price for it in a world where the use of land was completely restricted to its current use. In other words, the price he pays is something of an investment, and although meanwhile the land is used as part of a garden the purchaser feels that its value is assured because the market will always support the high price which an ultimate use as a building plot would command.
The Press has been quick to criticise the Land Commission for charging levy where the prospect of development seems somewhat distant. But, as I said earlier, this is not a scheme which the Land Commission has devised for increasing its revenue—it is on the contrary, only the proper application of valuation judgment in accordance with the Act and is subject to appeal to the Lands Tribunal.
Valuation is not an exact science and a valuation represents no more than an expression and record of the valuer's opinion. A valuation is the conclusion reached by the valuer after careful consideration of the facts. In short, it is broadly the valuer's reasoned view of the probable resultant of all human motives and reactions likely to be involved in relation to the land in question. This view is one which must stand up before the Lands Tribunal, and so long as taxation depends upon the assessment of land values I can see no fairer way of reaching a conclusion.
The hon. Member for Rye has quoted the case of the sale of a house, standing in slightly less than 1 acre of ground in Bromley by Mr. N. K. Dutt for £15,000. The hon. Member for Bromley (Mr. Hunt), the constituency Member concerned, has also mentioned the case of his constituent. This sale was duly notified to the Land Commission, and as it appeared that a charge to levy might be due, the district valuer was asked to open negotiations on behalf of the Commission, but neither the levy payer nor his solicitors have responded to the district valuer's letters.
In the meantime the levy payer has not been so reticent about writing to the Press. The Press has made great play of the fact that the local planning authority has said that an application to develop Mr. Dutt's former house would be rejected, and that in these circumstances the charge to levy is unjustified. I think that we must discount the amount of the levy which may be charged that has been quoted because the district valuer has not had an opportunity to negotiate with the levy payer, but, of course, the fact remains that some levy may be due.
In this particular case this may not he so surprising as the hon. Member would have the House believe. I understand that the purchaser owns adjacent property——

Mr. Hunt: Not adjacent.

Mr. Robinson: I understand that it is, and that there is planning permission for a development which may be facilitated by the inclusion of a part of the garden of Mr. Dutt's former house and that the purchaser has an interest in small developments of this nature. If Mr. Dutt gets into touch with the purchaser, all these matters can be sorted out.
From what I have said I hope the House will appreciate that, simply because there is no immediate plan to develop the land, it does not follow that no payment has been made for development value. Moreover, it is important that a payment for development value should be recognised at this stage since, if the land is eventually developed, the price paid for the land will form the base value when the levy is then calculated. Many house prices, particularly the prices of older houses, are supported


by the fact that purchasers are prepared to include a certain amount for the prospect of development in the price they pay.
It is in order to relieve the owners of small houses of a charge to levy in these circumstances that the Government introduced Clause 39 of the Finance Bill. This Clause increases the supplement to current use value from one-tenth to one-fifth where a house standing in a quarter acre or less is sold for not more than £10,000. Thus, if a house is sold for £6,000, so long as its current use value is at least £5,000, no levy would be payable. This provision will be of considerable assistance to small house owners, although where larger sites such as that sold by Mr. Dutt change hands the Commission will continue to watch for development value and assess it to levy on the present basis.
The hon. Member for Rye has also mentioned the case of Mr. H. Footman, of Carmarthen, but, in spite of the hon. Member's courtesy in letting me know yesterday that the case would be raised in this debate, I have not been able to obtain full details of it prior to this debate. But the hon. Member has asked for a reconciliation between one case and another, and this gives me the opportunity of saying that, whilst I have some doubts about the value of discussing in the House individual levy cases, I am sure that there are considerable arguments against attempts in a debate of this kind to reconcile a decision in one case arising out of a particular set of circumstances with a decision on a quite separate case which may appear to have similar characteristics. I will, however, consider what the hon. Member has said about the case of Mr. Footman and about the relationship between this case and Mr. Dutt's case and write to him when I have had the opportunity of considering it.

11.36 p.m.

Mr. Graham Page: The Minister's lucid and very careful explanation of the incidence of levy has only confirmed the injustice and unfairness of the imposition in many cases. In this case the right hon. Gentleman has explained that the levy is not a levy on money received but a levy on added value. That may be so.

The Minister has advanced the extraordinary proposition, or repeated it from what the district valuer seems to have said, that in valuing the present value of the property account must be taken not only of the prospects of development of that property when a local authority has said that it would not grant planning permission but also of the fact that the purchaser of that property owns some adjoining property.
I should not have thought that this was the right principle of valuation. One does not dispute that the land itself should be valued, perhaps on its hope value. Heaven knows that there is hardship enough arising out of that in many cases, because one has to wait for so long to realise the money from that hope value. However, if the district valuer is to take into account, the fact that the buyer also owns adjoining property and that by that marrying of the two properties the property purchased has increased in value, a wrong principle of valuation has been applied.
I know that this principle of marrying two sites and increasing the value of the whole applies when one is faced with compulsory purchase. One can argue it in a valuation in those circumstances. But I have not heard it argued in the case of valuing property for a hope value. If that is to he the case, there will be greater and greater hardship in these cases where the owner has to wait so long to realise the value but at the same time has to pay the levy out of money that he has not received. This is an argument which we have had many times in connection with the levy, but as each case comes up such as those which have been put before the House tonight we see the unfairness and injustice of the whole system of levy, and the sooner we get rid of it the better.

Mr. K. Robinson: If I may correct the hon. Gentleman on one point, I did not say that the valuer took this into account in making his valuation. I quoted what I understood to be the fact to show that perhaps the hope element here was not as remote as the right hon. Member for Rye suggested.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Twelve o'clock.